Author Topic: Need help calculating my parent's financial auto decision  (Read 4389 times)

sliqx

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Need help calculating my parent's financial auto decision
« on: October 28, 2015, 10:43:53 PM »
Hi guys! Short story short, my parents decided to buy a 2014 Ford Focus Titanium in June 2015 which ended up NOT being financially smart.
These are the details:
  • Trade in 2003 Honda: $1,350.00
    Cash down Payment: $5,000.00
    Paid 4 months so far ($1200.00)
    Unpaid cash balance/owe left: $14,290.75 @ 8.490% (THIS WAS AT JUNE 2015 AND NOT INCLUDING the 4 payments already)
    Interest owed: $3,431.80
    Monthly payment of $300.53 for 5 years
We recently stumbled upon a great LEASE deal with Toyota that I think would be fantastic for my parents.
  • $0 down (but after acquistion, title, fees + tax, $1500)
    $99/month for corolla with tax OR $155/month for camry with tax
    2 or 3 year lease.
So my question is: would it be beneficial for my parents to do some type of trade? They are absolutely getting killed in interest, and also because at their point of age, I think it would be best for them to be able to swap cars out every 2 years as they probably only have a few more years left of driving. The car itself (per KBB) is $13,881. Would you guys recommend trying to go back to the dealer and try selling it back to them? At what cost could we cut a lost?

These are the options
  • Keep paying for the Ford.
    Get out of the ford contract by selling it back to the dealer and start the Toyota lease.
Which is the better financial decision?

Argyle

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Re: Need help calculating my parent's financial auto decision
« Reply #1 on: October 29, 2015, 12:05:24 AM »
I have never heard of a situation in which a lease was the better decision.  Taking one poor decision and replacing it with another poor decision isn't a good decision either.

UnleashHell

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Re: Need help calculating my parent's financial auto decision
« Reply #2 on: October 29, 2015, 04:57:47 AM »
If they got an interest rate on a car thats north of 8% then that indicates that their credit is crap. Why do you think that they'll be able to get a good lease?
and why the hell do they need new cars ever two years?


Sell the car and get something reliable and second hand for cash. keep it for years. done.

paddedhat

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Re: Need help calculating my parent's financial auto decision
« Reply #3 on: October 29, 2015, 06:22:07 AM »
You get them out of the current mess, and move on. Find the middle ground between what they traded in, and new, say a 7-8 year old Corolla, and figure out how to get them in the thing without getting screwed again. Your claim that you stumbled on a "great" lease deal, that would be "fantastic" for your elderly parents is absurd. Unfortunately, a lot of elderly drivers have a bad habit of, at best, regularly bumping and bruising cars. When you rent (lease) a car, you return it is very good condition, or suffer the cost of repairing/ reconditioning it. The wife and I both had elderly drivers for parents, and both of their fairly new vehicles had thousands in damage when they ended their driving careers. Not only do you return the car in great condition, but what happens if, due to unforeseen events, their driving career ends next month? Now they are committed to a rental agreement for the next 2-3 years, for a car they can't use. That mess could easily cost them $8-10K to clean up. The next issue is that I seriously doubt that you would be able to qualify them for the super low lease rates, since it hinges on having great credit. Now you have to deal with gap insurance, since I doubt it is included in the low "teaser" rates. Without the added monthly payment of gap insurance, if they totaled the car, they would be on the hook for another coupe of grand. Sadly, I wouldn't invest to much in the alleged value of the Ford, based on the KBB number. That outfit is famous for giving inflated hope to sellers. The only way to learn the real value is to see what a few new and used car dealers are willing to pay for it, which may end up being thousands of dollars less.

Sibley

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Re: Need help calculating my parent's financial auto decision
« Reply #4 on: October 29, 2015, 08:54:39 AM »
Sell the car, get a used car. Lease is not a good idea.

Or refinance the loan to a better rate.

Gone Fishing

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Re: Need help calculating my parent's financial auto decision
« Reply #5 on: October 29, 2015, 09:15:46 AM »
The damage is done.  I vote for refinancing to a better rate and living with it. 

RetiredAt63

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Re: Need help calculating my parent's financial auto decision
« Reply #6 on: October 29, 2015, 09:19:59 AM »
OP wrote at their point of age(s?), I think it would be best for them to be able to swap cars out every 2 years as they probably only have a few more years left of driving.

So how old are they?  And in bad health?  Because I know lots of people in their 60s and 70s and 80s (and a few in their 90s) who are still driving and who are still good drivers.  I am not sure this should be a factor for any car decision.

zephyr911

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Re: Need help calculating my parent's financial auto decision
« Reply #7 on: October 29, 2015, 09:26:15 AM »
The amount of time they may or may not have left doesn't make the lease a good deal.
Two routes they can go:
1. Keep the car indefinitely, while aggressively paying off the debt (refi if possible, after punching themselves in the face for ever accepting that loan)
2. Trade the car for something cheaper that will depreciate more slowly, preferably without adding much maintenance cost

sliqx

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Re: Need help calculating my parent's financial auto decision
« Reply #8 on: October 29, 2015, 10:07:19 AM »
Thanks for the help. I think we're just going to help my parent's pay off the loan and be done with. That's a guaranteed 8.5% return rate.

TheAnonOne

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Re: Need help calculating my parent's financial auto decision
« Reply #9 on: October 29, 2015, 10:12:29 AM »
Thanks for the help. I think we're just going to help my parent's pay off the loan and be done with. That's a guaranteed 8.5% return rate.

My unmustashian side gets a sports car every 5-8 years(it's my one toy) and the interest rate was under 2% for a credit score just barely over 700 (Credit card churning has dropped it a bit)

How do you even get a loan on a car for 8+?

UnleashHell

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Re: Need help calculating my parent's financial auto decision
« Reply #10 on: October 29, 2015, 10:21:08 AM »
Thanks for the help. I think we're just going to help my parent's pay off the loan and be done with. That's a guaranteed 8.5% return rate.

My unmustashian side gets a sports car every 5-8 years(it's my one toy) and the interest rate was under 2% for a credit score just barely over 700 (Credit card churning has dropped it a bit)

How do you even get a loan on a car for 8+?

We had to get a new (to us) car for my wife earlier this year – another minivan to replace the one we’d had for 12 years!

Could have paid it all but decided to run the finance through and see what they came up with.

My wife has a score of 793 – but they only offered 8.5% because she didn’t have much credit history. The same old stupid story of credit – if you don’t use it you lose it!!

I had a discussion with the finance guy and magically they found a rate of 2.2% if you were a member of one of the local credit unions – and we were.

He forgot to mention that with his first offer and was getting seriously pissed that I’d challenge him.


So yeah – you can have great credit and get 8.5% cars loans offered to you.

zinethstache

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Re: Need help calculating my parent's financial auto decision
« Reply #11 on: October 29, 2015, 10:28:16 AM »
Local credit union auto rates are in the 2s...(implying their credit is not good if they ended up with 8.5 OR the dealership is a ripoff)  It never fails with old age, that final straw to not driving any more is an accident and often with a stationary object they did not see so... I still think that the new car is not a good idea. They need a used car that can take the dings and not be a huge impact on the value. It will eventually be a write off.

I would sell that new car asap.

zephyr911

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Re: Need help calculating my parent's financial auto decision
« Reply #12 on: October 29, 2015, 12:56:43 PM »
So yeah – you can have great credit and get 8.5% cars loans offered to you.
You can also walk the fuck out! ;)

eyePod

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Re: Need help calculating my parent's financial auto decision
« Reply #13 on: October 29, 2015, 01:13:47 PM »
It never fails with old age, that final straw to not driving any more is an accident and often with a stationary object they did not see so...

My favorite is the "I was got dizzy!" "Grandma, that's the 2nd parked car you've totaled in the past 6 months. Each time you hit the gas instead of the brake." She no longer drives.

paddedhat

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Re: Need help calculating my parent's financial auto decision
« Reply #14 on: October 29, 2015, 03:21:34 PM »
It never fails with old age, that final straw to not driving any more is an accident and often with a stationary object they did not see so...

My favorite is the "I was got dizzy!" "Grandma, that's the 2nd parked car you've totaled in the past 6 months. Each time you hit the gas instead of the brake." She no longer drives.

My 81 year old MIL pulled a double header with this issue. She was slowly driving down the main street of her Mayberry like town, when she failed to notice that another very old woman had walked out, between two cars, and right in to her path, without even bothering to look for traffic.  She hit the pedestrian, which left the woman mildly injured. What are the odds of that cosmic convergence?

UnleashHell

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Re: Need help calculating my parent's financial auto decision
« Reply #15 on: October 30, 2015, 06:08:23 AM »
So yeah – you can have great credit and get 8.5% cars loans offered to you.
You can also walk the fuck out! ;)

I was very close. I did tell the guy that I don;t do those interest rates. you could tell he was offering the loans with a nice kick back for him.

It didn't work for him.
I should have paid cash. Instead I kept my money invested in the market for the last 6 months and look how well thats turned out :D