Author Topic: Underwater in Diesel Pickup Truck  (Read 1730 times)

lifeminimalized

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Underwater in Diesel Pickup Truck
« on: October 10, 2019, 11:44:34 AM »
I have a pretty much brand new 2018 RAM 3500 Cummins diesel pickup with 2500 miles on it that I am looking to downgrade. Possibly to a 1500 or maybe even a car.

Anyway, I did purchase the truck new as a leftover 6 months ago so I ate that initial depreciation which is the largest. So now I am finding that dealers are offering about 10k under what I owe if I was to trade it in.

Is a situation like this best to just keep the truck? I would imagine if I was to eat the 10k I would need to justify it by not rolling it into another vehicle and just use my commuter car I own outright.

In that situation I would break even after 10 months because my truck payment is 975 and obviously with the 10k hit if I am saving that 975 a month then I would theoretically break even in roughly 10 months.

If I sit on the truck and just keep it, then after 10 months I will have paid the note down 10,000 minus interest.

Curious on the advice you guys may have on this.

Thanks in advance.
« Last Edit: October 10, 2019, 11:47:35 AM by lifeminimalized »

neo von retorch

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Re: Underwater in Diesel Pickup Truck
« Reply #1 on: October 10, 2019, 11:57:27 AM »
Ignoring all other financials...

Before truck purchase:
Have $10,000 (net worth = $10k)

After truck purchase:
Have $10k money
Have $50k debt
Have $50k truck

Two days later:
Have $10k money
Have $50k debt
Have $40k truck

Net worth: $0

If you sell truck for $40k and pay the $10k towards your debt, your new net worth will be $0 same as before you sell it.


Now... would you buy this truck back for $40k under your new situation, or would you buy a $20k or $15k vehicle?

lifeminimalized

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Re: Underwater in Diesel Pickup Truck
« Reply #2 on: October 10, 2019, 12:03:00 PM »
Ignoring all other financials...

Before truck purchase:
Have $10,000 (net worth = $10k)

After truck purchase:
Have $10k money
Have $50k debt
Have $50k truck

Two days later:
Have $10k money
Have $50k debt
Have $40k truck

Net worth: $0

If you sell truck for $40k and pay the $10k towards your debt, your new net worth will be $0 same as before you sell it.


Now... would you buy this truck back for $40k under your new situation, or would you buy a $20k or $15k vehicle?

I wouldn't purchase anything. I feel to make it worth the 10k I should rely on my car I already own so I can maximize savings moving forward.
« Last Edit: October 10, 2019, 12:13:32 PM by lifeminimalized »

terran

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Re: Underwater in Diesel Pickup Truck
« Reply #3 on: October 10, 2019, 12:09:03 PM »
Put another way: the purchase is a sunk cost, so ignore it. At this point would you buy this truck for what you can sell it for? If yes, keep the truck. If no, sell the truck.

What's the private party value of the truck? It's usually higher than what a dealer will pay you.

JLee

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Re: Underwater in Diesel Pickup Truck
« Reply #4 on: October 10, 2019, 12:09:58 PM »
How much more will it depreciate in another 10 months?

rothwem

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Re: Underwater in Diesel Pickup Truck
« Reply #5 on: October 10, 2019, 12:12:22 PM »
Maybe try listing it for sale yourself? Dealers need to make money on the cars they buy for trade in, so they offer way under market value to people who are too intimidated by the sales process then turn around and sell them.

neo von retorch

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Re: Underwater in Diesel Pickup Truck
« Reply #6 on: October 10, 2019, 12:13:03 PM »
Ignoring all other financials...

Before truck purchase:
Have $10,000 (net worth = $10k)

After truck purchase:
Have $10k money
Have $50k debt
Have $50k truck

Two days later:
Have $10k money
Have $50k debt
Have $40k truck

Net worth: $0

If you sell truck for $40k and pay the $10k towards your debt, your new net worth will be $0 same as before you sell it.


Now... would you buy this truck back for $40k under your new situation, or would you buy a $20k or $15k vehicle?

I wouldn't purchase anything. I feel to make it worth the 10k I should rely on my car I already own so I can maximize savings moving forward.

Yes - as others have pointed out, I'm explaining that the $10k decreased value of the truck has already occurred whether you keep it or not, so you have to evaluate your situation right now. In my example, at the end you've already sold the truck and dealt with the $10k of underwater debt.

So I assume you misunderstood that - in that scenario you don't have the truck. Do you have another car or can you do without entirely?

lifeminimalized

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Re: Underwater in Diesel Pickup Truck
« Reply #7 on: October 10, 2019, 12:13:09 PM »
My interest rate is low. So I would assume if I held onto the truck for 10 months I would not be much worse off. The truck will still have been paid down pretty close to 10K with the interest hit in there. I am thinking that since the initial depreciation hit is the largest, right now would be the worst time to toss it and take the hit. The depreciation curve for this truck will not be as steep as driving it off the lot as I did. So in a year it is possible I will be offered the same if not close to the same numbers from a dealer and I will have paid off 10k and got to drive the drive for a year.

Thoughts on this?

lifeminimalized

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Re: Underwater in Diesel Pickup Truck
« Reply #8 on: October 10, 2019, 12:14:31 PM »
How much more will it depreciate in another 10 months?

Please see my post above. I think I am on the same page as you are getting at.

neo von retorch

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Re: Underwater in Diesel Pickup Truck
« Reply #9 on: October 10, 2019, 12:16:28 PM »
$10k is a huge amount to pay to have a car for a year! I usually average $2k or less in depreciation costs per year.

If you look up both a 2018 and a 2017 model of your car on used car web sites with similar trim levels and mileage, what are they priced at?
(Try cars.com, cargurus.com, autotrader.com, etc.) Get a better picture of how much another year will add to depreciation.

I'd do it for you, but the range on that kind of truck is anywhere from $35k to $90k... so you have to be pretty specific with the options you have.

lifeminimalized

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Re: Underwater in Diesel Pickup Truck
« Reply #10 on: October 10, 2019, 12:18:11 PM »
Ignoring all other financials...

Before truck purchase:
Have $10,000 (net worth = $10k)

After truck purchase:
Have $10k money
Have $50k debt
Have $50k truck

Two days later:
Have $10k money
Have $50k debt
Have $40k truck

Net worth: $0

If you sell truck for $40k and pay the $10k towards your debt, your new net worth will be $0 same as before you sell it.


Now... would you buy this truck back for $40k under your new situation, or would you buy a $20k or $15k vehicle?

I wouldn't purchase anything. I feel to make it worth the 10k I should rely on my car I already own so I can maximize savings moving forward.

Yes - as others have pointed out, I'm explaining that the $10k decreased value of the truck has already occurred whether you keep it or not, so you have to evaluate your situation right now. In my example, at the end you've already sold the truck and dealt with the $10k of underwater debt.

So I assume you misunderstood that - in that scenario you don't have the truck. Do you have another car or can you do without entirely?

No I understood your post. I understand in a net worth outlook I am net 0 either way. However, there is something to say about keeping the loss on paper by still owning the truck. Once I sell the truck I have realized the loss and my 10k is gone.

JLee

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Re: Underwater in Diesel Pickup Truck
« Reply #11 on: October 10, 2019, 12:19:53 PM »
Ignoring all other financials...

Before truck purchase:
Have $10,000 (net worth = $10k)

After truck purchase:
Have $10k money
Have $50k debt
Have $50k truck

Two days later:
Have $10k money
Have $50k debt
Have $40k truck

Net worth: $0

If you sell truck for $40k and pay the $10k towards your debt, your new net worth will be $0 same as before you sell it.


Now... would you buy this truck back for $40k under your new situation, or would you buy a $20k or $15k vehicle?

I wouldn't purchase anything. I feel to make it worth the 10k I should rely on my car I already own so I can maximize savings moving forward.

Yes - as others have pointed out, I'm explaining that the $10k decreased value of the truck has already occurred whether you keep it or not, so you have to evaluate your situation right now. In my example, at the end you've already sold the truck and dealt with the $10k of underwater debt.

So I assume you misunderstood that - in that scenario you don't have the truck. Do you have another car or can you do without entirely?

No I understood your post. I understand in a net worth outlook I am net 0 either way. However, there is something to say about keeping the loss on paper by still owning the truck. Once I sell the truck I have realized the loss and my 10k is gone.

It's already gone, whether you've "realized" it or not. :)

six-car-habit

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Re: Underwater in Diesel Pickup Truck
« Reply #12 on: October 10, 2019, 12:22:22 PM »
 I'll assume you paid less than MSRP due to it being a 2018 model you bought in 2019.[?]
People are going to comment here about 'sunk-cost-fallacy' and that you should sell it regardless of how  much you paid toward it so far.

So here's my take - Why did you buy it, for what intended purpose ?
We own one , A 3500 diesel dodge. I bought it new. I am kinda stupid when it comes to spending money on vehicles.

 But.... I use it to go to the dump monthly. I've hauled 100's of loads/ cubic yards of dirt, rocks, landscaping materials, etc for our homes. We put our Camper in the back and go to state and national parks with it. We've driven on 5000 mile road trips, to visit family, and experiencing towns, people, places, we simply would not have, if we just took a plane. We moved our household between counties when we changed houses [ no moving van]. We 'save' money by hauling our own lumber, new furniture, washer and dryer, greenhouse, etc [ would cost $60+ to have these things delievered, each time]. I pull a car trailer with it, to support my vehicle hobbies. We help friends move with it. I've pulled peoples cars stuck in mudholes off the side of the street, out with it. We've pulled stumps, and bushes out with it. Towed a friends tractor for him.  --I could go on, but i think this illustrates the point i am trying to make. And i don't live on a farm , this is just regular suburban usage.

 my rig is about 9 years old. Right now i could easily get 65% of what i paid for it, were i to sell it private party. And would probably get a "trade-in value" of 60%. It has needed minimal maintneance beyond oil changes. It's paid off.  I made it a priority to pay off the loan asap.

  If you intend to use it like we do, you should hunker down and pay it off.  If it is some sort of status symbol, or you don't know why you bought it, so the finances are keeping you awake at night , sell it.
  I'll just close by saying there's no camry or priius in the world, that will fit a camper on it,  or that you can go to the landscaping materials place and have a front end loader drop 4000 lbs of rocks in the rear seat area.

seattlecyclone

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Re: Underwater in Diesel Pickup Truck
« Reply #13 on: October 10, 2019, 12:24:05 PM »
My first thought upon reading your post title was this:



And I thought man, that sounds expensive!

Your actual situation is still expensive, but not that expensive. Even if you don't drive it, that truck is costing you money every month in insurance, registration, and loan payments. If you don't actually need it, sell it.

lifeminimalized

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Re: Underwater in Diesel Pickup Truck
« Reply #14 on: October 10, 2019, 12:36:29 PM »
I'll assume you paid less than MSRP due to it being a 2018 model you bought in 2019.[?]
People are going to comment here about 'sunk-cost-fallacy' and that you should sell it regardless of how  much you paid toward it so far.

So here's my take - Why did you buy it, for what intended purpose ?
We own one , A 3500 diesel dodge. I bought it new. I am kinda stupid when it comes to spending money on vehicles.

 But.... I use it to go to the dump monthly. I've hauled 100's of loads/ cubic yards of dirt, rocks, landscaping materials, etc for our homes. We put our Camper in the back and go to state and national parks with it. We've driven on 5000 mile road trips, to visit family, and experiencing towns, people, places, we simply would not have, if we just took a plane. We moved our household between counties when we changed houses [ no moving van]. We 'save' money by hauling our own lumber, new furniture, washer and dryer, greenhouse, etc [ would cost $60+ to have these things delievered, each time]. I pull a car trailer with it, to support my vehicle hobbies. We help friends move with it. I've pulled peoples cars stuck in mudholes off the side of the street, out with it. We've pulled stumps, and bushes out with it. Towed a friends tractor for him.  --I could go on, but i think this illustrates the point i am trying to make. And i don't live on a farm , this is just regular suburban usage.

 my rig is about 9 years old. Right now i could easily get 65% of what i paid for it, were i to sell it private party. And would probably get a "trade-in value" of 60%. It has needed minimal maintneance beyond oil changes. It's paid off.  I made it a priority to pay off the loan asap.

  If you intend to use it like we do, you should hunker down and pay it off.  If it is some sort of status symbol, or you don't know why you bought it, so the finances are keeping you awake at night , sell it.
  I'll just close by saying there's no camry or priius in the world, that will fit a camper on it,  or that you can go to the landscaping materials place and have a front end loader drop 4000 lbs of rocks in the rear seat area.

I got ~12% under MSRP.

neo von retorch

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Re: Underwater in Diesel Pickup Truck
« Reply #15 on: October 10, 2019, 12:53:28 PM »
Right, @six-car-habit has a point that doesn't conflict with our other points.

If you didn't have the truck right now, would you buy it at the price you could get selling it privately, or would you buy something different?
In other words, do you frequently do all the things listed above with your truck and make the most of it, or is it a massively overpriced status symbol?

If you absolutely financially cannot sell it privately because you've got a loan and zero assets to pay it off, then perhaps other members could give you some creative solutions for getting out of the predicament. Or you can pay extra on the loan over the next 10 months and deal with the additional value loss of trading it in compared to selling it privately. You've got lots of options here. Don't limit yourself, and don't make the decision based on the past. Where do you want to move from here?

Maybe you need to forecast out five or ten years. What do you want those to look like? Is the truck an essential part of your life during that time period, or could you be creative in other ways?

I owned a $35k truck - but now I own a $15k hatchback. I still make lots of Home Depot trips and camping trips; just without all the fancy luxury bonuses that the huge truck affords. But that's my lifestyle choice, not yours. Still, you wouldn't be here if you didn't know that it's a strictly suboptimal financial choice to be burdened with that truck and the big loan you have to carry.

six-car-habit

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Re: Underwater in Diesel Pickup Truck
« Reply #16 on: October 10, 2019, 01:07:02 PM »
 Thats pretty good -12%. I think i got about 10% [ although i bought it in september, just as the new year models were coming out ] I went in based on knowing the invoice pricing, holdbacks, got a good interest %, etc.

  Anyhow if you can afford the payment + some extra principal to knock the loan down [ while still putting $$ toward retirement ] in 2 years you will be positive equity on it for sure.
 I never really regretted owning the truck. Yes the payment was annoying. But now i have a 9 yr old truck with 50K miles on it, that should last another 20 years easily. I can't imagine needing to 'upgrade' it ever.
 If you do most of the work around your home yourself, i think it will pay for itself in the long run.   If you live in an apartment, and will for the next ten years -or- live in a house but pay a handyman to perform any job that might get your fingers dirty, Never plan on going camping or towing a boat, etc, - its probably better to cut it loose, swallow your pride, and take the $10K hit.

ysette9

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Re: Underwater in Diesel Pickup Truck
« Reply #17 on: October 10, 2019, 01:14:18 PM »
When you are in a hole the first thing to do is stop digging.

It sounds like you donít need the truck, have reliable alternative transportation. This that is costing you an arm and a leg. I vote for get rid of it and make sure not to make that kind of mistake again.

six-car-habit

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Re: Underwater in Diesel Pickup Truck
« Reply #18 on: October 10, 2019, 01:15:21 PM »
 Agree with neo-von-retorch - you absolutley can get by with a hatchback for home-depot and camping trips.

  We just have a situation where we wanted to support a step above tent camping [ the truck camper w/ kitchen and toilet/shower] and do lots of landscaping projects where i save money buying soil/rocks by the cubic yard vs buying multiple 50 pound bags of dirt.

ysette9

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Re: Underwater in Diesel Pickup Truck
« Reply #19 on: October 10, 2019, 01:18:45 PM »
Renting a truck for true truck-y situations is a totally valid option as well. Except for the dudes around here who work as landscapers, 90% of the trucks I see are used as single occupant passenger vehicles. Donít be silly like that.

Laura33

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Re: Underwater in Diesel Pickup Truck
« Reply #20 on: October 10, 2019, 01:20:56 PM »
My interest rate is low. So I would assume if I held onto the truck for 10 months I would not be much worse off. The truck will still have been paid down pretty close to 10K with the interest hit in there. I am thinking that since the initial depreciation hit is the largest, right now would be the worst time to toss it and take the hit. The depreciation curve for this truck will not be as steep as driving it off the lot as I did. So in a year it is possible I will be offered the same if not close to the same numbers from a dealer and I will have paid off 10k and got to drive the drive for a year.

Thoughts on this?

Make sure you are doing an apples-to-apples comparison.

-- How many miles do you think you will drive it?  Do some research on the value of the truck at different mileages and years, rather than just assuming that you can get the same amount 9 months from now.
-- How much more will you be spending on fuel to drive this truck for a year than to stick with your commuter vehicle?
-- How much extra in insurance will you pay to insure such an expensive new vehicle in addition to your commuter vehicle? 
-- Based on your anticipated mileage and how good a shape it was in when you bought it, will you need to do any additional maintenance on the truck over the next year (oil changes, tires, etc.)?

Generally, the up-front cost of a big, expensive vehicle like that is only one part of the ongoing costs.  So the question is really whether you rip the band-aid off now, or deal with death-by-1000-cuts over the next few months.

neo von retorch

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Re: Underwater in Diesel Pickup Truck
« Reply #21 on: October 10, 2019, 01:26:41 PM »
Oof I totally skimmed over the part where you have a commuter car. Sorry about that!

This past weekend, I rented a truck from Lowes (picked up a wood stove - and boy I'm glad I wasn't abusing my OWN truck). Because I was driving an hour both ways and they only have one truck with no reservations, I got it for all day. With fees and taxes, the total cost was $98. That is the cost I've paid for truck use in the past 30 months. (Plus $7 in gas.) And I do a lot of work around the house. I'd really enjoy having a truck. But I also feel like a real bad-ass when I use creativity and sweat to get things done without a truck, for a ton less money. But again, I'm ranting about my lifestyle. You are here because you want to make decisions that improve your lifestyle.

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Re: Underwater in Diesel Pickup Truck
« Reply #22 on: October 10, 2019, 01:37:41 PM »
I bought my fully loaded 1992 Dodge D250 Ram with Cummins Turbodiesel and intercooler on May 29, 2001 from the original California owner for $5,500. Now, a good 18 years later and 140K miles more on the clock I could sell it for considerably more than I paid. The truck has been relatively trouble free, save for one injection pump back in 2006, and I'll keep it 'til I retire. That's what I consider real value or bang for the buck. Of course, this truck lacks the prestige of a newer truck, but that's not something I care about.

If I were in your shoes, I'd at least try to sell the truck on the private market for a few thousand dollars more than dealer trade-in. It's hard to sell an expensive vehicle without financing, but there are a few folks out there who have the cash to buy a new one, yet prefer to save thousands by buying a slightly used one. You'll still be underwater a bit, but not ten grand.

From that day one, promise yourself to never finance anything again but real estate. Drive a clunker 'til you have enough cash (about $5K) saved up to buy a decent used vehicle. My neighbor has a fabulous 2006 Chevy Ex-Cab with 150K on the clock for $5K. It would serve you well for the next 5 to 10 years.

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Re: Underwater in Diesel Pickup Truck
« Reply #23 on: October 16, 2019, 05:28:22 AM »
I'll assume you paid less than MSRP due to it being a 2018 model you bought in 2019.[?]
People are going to comment here about 'sunk-cost-fallacy' and that you should sell it regardless of how  much you paid toward it so far.

So here's my take - Why did you buy it, for what intended purpose ?
We own one , A 3500 diesel dodge. I bought it new. I am kinda stupid when it comes to spending money on vehicles.

 But.... I use it to go to the dump monthly. I've hauled 100's of loads/ cubic yards of dirt, rocks, landscaping materials, etc for our homes. We put our Camper in the back and go to state and national parks with it. We've driven on 5000 mile road trips, to visit family, and experiencing towns, people, places, we simply would not have, if we just took a plane. We moved our household between counties when we changed houses [ no moving van]. We 'save' money by hauling our own lumber, new furniture, washer and dryer, greenhouse, etc [ would cost $60+ to have these things delievered, each time]. I pull a car trailer with it, to support my vehicle hobbies. We help friends move with it. I've pulled peoples cars stuck in mudholes off the side of the street, out with it. We've pulled stumps, and bushes out with it. Towed a friends tractor for him.  --I could go on, but i think this illustrates the point i am trying to make. And i don't live on a farm , this is just regular suburban usage.

 my rig is about 9 years old. Right now i could easily get 65% of what i paid for it, were i to sell it private party. And would probably get a "trade-in value" of 60%. It has needed minimal maintneance beyond oil changes. It's paid off.  I made it a priority to pay off the loan asap.

  If you intend to use it like we do, you should hunker down and pay it off.  If it is some sort of status symbol, or you don't know why you bought it, so the finances are keeping you awake at night , sell it.
  I'll just close by saying there's no camry or priius in the world, that will fit a camper on it,  or that you can go to the landscaping materials place and have a front end loader drop 4000 lbs of rocks in the rear seat area.

Yeah..I agree with you here. I used to have a truck and I bought what I needed to tow. That was ~6k pounds, so a 1500 Sierra did the trick, until I didn't need to tow, then I got ride of it.

A one ton is a big truck. Sounds like you use it though. If OP doesnt tow, haul, whatever, then get rid of it.

Fishindude

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Re: Underwater in Diesel Pickup Truck
« Reply #24 on: October 16, 2019, 08:35:47 AM »
You obviously had a need or wanted the truck for some reason.   If it's not killing you making the payments I'd just keep it and get it paid off soon as you can.
Drive the car for your daily commuting and that truck should last you a real long time, should still be fairly low miles and in great shape ten years from now.

shawndoggy

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Re: Underwater in Diesel Pickup Truck
« Reply #25 on: October 16, 2019, 12:24:21 PM »
the upside is that late model diesel trucks seem to depreciate almost not at all (at least in my 'hood).  Not like a mercedes or bmw would anyhow. 

If you saw fit to buy a 3500 CTD you must be pulling something??  If not towing (or planning to, imminently) then it doesn't make a ton of (any) sense, and you'd be better served learning the $10K lesson now but not continuing the bleeding (insurance, fuel, maintenance, registration, in addition to the loan costs you've identified).