Swapping for a cheaper used car?

[Aufty]

Hello all! I stumbled upon this community through an internet search about a problem that has been nagging at me for several months now. About a year ago, I purchased a 2010 Honda Accord for around 20k after fees. I'm now realizing that it's been an unnecessary drain on my funds, in gas, car insurance, and car payments.

I was thinking about swapping for something cheaper and more fuel efficient but I can't decide if it makes sense or not. My car currently has around 58,000 miles on it (KBB estimated value of 13990, last I checked). My remaining loan is 14,827. I pay 600 a month towards the car loan (and I just recently pushed my whole tax refund into it).

Work is 25-30 miles away and I make the drive to Chicago around once a month (140 miles one way) to see family and friends.

I live with my girlfriend and we share a ride to work every day.

Does it make sense to trade down at this point? My car is getting 27 mpg and I think I'm paying around 600 dollars biannually for car insurance.

There are so many factors!

[burly]

Hi Aufty, welcome to the boards!

I'm somewhat in the same boat and am interested to see what others say... however..

1. $600 payment?! That is either a horrible rate or very short term or you're including additional principal payments.
2. You said you pay $600 biannually, is that total of $600 or $1200 a year?? If $1200, then yikes, you need to talk to someone to save at least 15% in 15 minutes.


My situation is similar but I pay about $500/yr in car insurance and $219/mo @ 2% for the car loan. I'm at the point where my car is at the ideal stage in life where one would buy it for the best bang for the buck (2011 @ 60k). The only real alternative is to go to a cheaper $2-3k car with cash and cut the insurance to the bare.

As of now, I am choosing to keep my vehicle because I like having the peace of mind of a reliable car for work... Especially without too many friends and family around.

Curious to hear other's thoughts.


Edit: Had a few more thoughts...

[Cassie]

I am also assuming you are paying extra or have a short term loan. since I am older and have bought new, used and cheap cars what works for us is to by a used car (about 3-4 yo) and drive it until it dies or repairing it no longer makes sense.  At this point I would pay it off as quick as you can and then drive it forever (Honda's have a great reputation). If you buy an older car that you didn't take care of when it was newer you might have all sorts of unexpected problems. Also you have already paid a fair amount on it so I would keep it.  Hopefully, the next car you can pay with car but I bet you will be payment free for a lot of years.

[Aufty]

I should have mentioned... my payment is 385 a month and I'm paying extra towards the principal. I can't seem to find the APR for the loan on Wells Fargo's site, but I definitely opted for the shortest loan term they offered.

[phred]

Your car is now 3 or 4 years old.  Since most of us look for cheap cars that are 3 or 4 years old, you're already there.  Keep it.

[workathomedad]

I think you overpaid. You may just want to keep it until it dies at this point. You probably won't get more than $10k on the used market even though KBB says it's worth more.

[loki]

Keep it. From a safety standpoint, the '08+ Accord generation is one of the safest cars you can buy, based on driver death rates.

http://www.iihs.org/externaldata/srdata/docs/sr4605.pdf

Pay it off as quickly as you can and then keep it for another 200,000 miles. Or more.

[soccerluvof4]

keep it.

[Aufty]

Seems like the consensus is to keep it! I guess that makes my decision a bit easier... Now I guess I should aim to cut my insurance a little bit if it's high.

[the fixer]

Someone needs to dissent!

Forget how much underwater you are on the car; that's a sunk cost that you've already committed to paying. All you can do now is pay down the loan. Let's assume you could just pay off the loan tomorrow; at that point, the question would be: if you had no car, would you be willing to buy this one at the $13k price you mentioned?

I wouldn't buy it at that price. You should be able to get a used car for $8k at most that will do what you need and get better mileage. You will need to go private party to get such a deal, though; forget the car dealers.

The only other consideration is whether or not you would have the cash on hand to buy another car; no more car loans! If you don't, pay down this loan as fast as you can and then accumulate a few grand you can use to buy a cheaper car. Find and buy your financial dream car on Craigslist. Finally, sell the Accord.