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View Full Version : Dilemma...stick with current car or get newer car?



MR2 Fan
September 29th, 2014, 03:54 AM
Here's the really crappy situation I'm in.

I have a 2007 Scion Tc with around 100,000 miles on it. It runs ok, but I know that its going to start needing some maintenance work, possibly clutch replacement, brakes, tires, suspension, etc. It has some bumper damage and it is starting to "feel" its age and may need some other work done.

Also, after being a complete and total moron, I re-financed the car twice, which means I actually still owe over $9,000 for it, and it's worth around $5,000.

As you may have read, I'm trying to move to Japan, hopefully in less than a year.

I've been considering selling it and getting a newer used car, but it depends on if I can tie that into what I owe along with it, maybe $1,500 down payment.

If I don't buy a brand new car, I shouldn't need to worry about it being worth a few grand less as soon as I drive it off the lot.

So I don't know whether I should keep it and just put that money into maintenance, or buy a newer car that's in better shape and re-sell that in a year. I'm thinking a $12,000-$15,000 car, to keep my payments about the same.

Thoughts?

samoht
September 29th, 2014, 04:59 AM
I'd look up "bangernomics" - the art and science of buying the cheapest possible car that will give you at least six months' service, then scrap it and buy another.
Eg http://forums.moneysavingexpert.com/showthread.php?t=861921

However, I suspect that this works much better in the UK than the US, where you actually 'use up' your cars by driving more miles. But if you can do something like that, that would be cheapest I suspect.

MR2 Fan
September 29th, 2014, 06:21 AM
the problem is I'd have to pay off the difference I owe in my car if I sell it outright, at least if I get a nearly new car, usually the dealers can "roll" that price into the new loan

Crazed_Insanity
September 29th, 2014, 06:42 AM
Used car rates are higher than new car rates. Plus, if you buy from dealer, surely they have to profit off of you. Unless you find some private party deal, I'd not spend the money. Especially if you are already planning to leave the country soon?

Who knows how long your current car can last without the new clutch, tires, etc. Just take it easy with your current car... and hopefully by the time to leave for Japan, what you owe will actually match the actual value of your car. Save your $1500 downpayment as emergency car repair money. Hopefully you won't have to use it.

MR2 Fan
September 29th, 2014, 06:47 AM
yeah, probably right...meanwhile I'll get an AAA membership, just in case ;)

novicius
September 29th, 2014, 06:53 AM
Even if you win the Craigslist lottery and find a family to buy it from you right now for $7K, you're short $2K. Pay $1500 and you're still short $500. Also, you want to leave the country.

I vote putting that money into maintenance (doing the work yourself as much as possible) to pump up the value and work on paying down the principle to get out from under it until you leave the U.S. Ignore the tired suspension (you're in FL) and body damage, get the brakes working right, look into some passable high mileage tires and save the big bill for the clutch.

It's not the sexy answer but considering where you're sitting, it's the most cost-effective solution. #$0.02

Crazed_Insanity
September 29th, 2014, 08:22 AM
100k miles on a modern car really is nothing. There's really no dilemma. The choice is really simple for the right thing to do. I guess the real dilemma is that you really want a better/newer car, right? ;)

If you can afford it, then by all means just go for it. You probably won't be owning a car in Japan!

Now if you can't really afford it, then you really should not be looking at this problem as a 'dilemma'. ;)

MR2 Fan
September 29th, 2014, 08:35 AM
100k miles on a modern car really is nothing. There's really no dilemma. The choice is really simple for the right thing to do. I guess the real dilemma is that you really want a better/newer car, right? ;)

If you can afford it, then by all means just go for it. You probably won't be owning a car in Japan!

Now if you can't really afford it, then you really should not be looking at this problem as a 'dilemma'. ;)

Well I'm paying $316 a month for the car I have now...which is horrible and I really hate myself for doing the refi twice, I figured I could get a newer car with less mileage for the same monthly rate, the question is after a year or whatever, will I be better off selling a newer car with lower mileage...I think its possible, but ANY time you buy a used car, you don't know how it was abused.

George
September 29th, 2014, 09:48 AM
Ouch.

What I would do pay off the debt and roll the dice with maintenance other than oil changes and tire pressure checks. I think buying and selling cars right now isn't going to help you any.

I know talk is cheap but so is my car - '99 Accord with 209K miles, bought six years ago to replace a '94 Camry with 220K miles.

100K miles is just getting broken in for Honda and Toyotas (and I must assume Scions, too).

Crazed_Insanity
September 29th, 2014, 10:24 AM
Don't not shop for things based solely on monthly payment alone. Surely you'll get dinged by interest rates or obscene # of payments later on. You probably fell into that refi trap by the appealing monthly payments, right? See how you're regretting it now?

Unless you found a great deal on a car and you are reasonably sure that car wasn't abused, stop trying to make shopping decisions based the monthly payment non-sense. Look at it from the total cost perspective. You won't get a great deal getting a used car from a dealer. You also for sure will be raped again by the banks when you transfer your current loan to the newer car.

Lastly, remember in the future that refinancing can only be an option if you can somehow reduce your interest or overall payment. Never refi to get money into your pocket just because you need the money. If you really need the money, sell the damn thing to get the money you need.

I can't believe somebody would lend you money on a car that's worth less than the amount they're giving you. They must've charged you a pretty high interest or made the loan term super long, huh? Hope this type of predatory lending isn't too widespread...

MR2 Fan
September 29th, 2014, 10:32 AM
Don't not shop for things based solely on monthly payment alone. Surely you'll get dinged by interest rates or obscene # of payments later on. You probably fell into that refi trap by the appealing monthly payments, right? See how you're regretting it now?

Unless you found a great deal on a car and you are reasonably sure that car wasn't abused, stop trying to make shopping decisions based the monthly payment non-sense. Look at it from the total cost perspective. You won't get a great deal getting a used car from a dealer. You also for sure will be raped again by the banks when you transfer your current loan to the newer car.

Lastly, remember in the future that refinancing can only be an option if you can somehow reduce your interest or overall payment. Never refi to get money into your pocket just because you need the money. If you really need the money, sell the damn thing to get the money you need.

I can't believe somebody would lend you money on a car that's worth less than the amount they're giving you. They must've charged you a pretty high interest or made the loan term super long, huh? Hope this type of predatory lending isn't too widespread...

I wasn't shopping for things based on monthly payment, I'm thinking based on having a much newer car with lower mileage for the same monthly payment I'm paying for a car with 100K and losing value constantly.

The lender gave me a few thousand cash to pay off other debts I had...then after about 2 years I had missed a few payments, they offered to re-finance for me a second time as a way to get out being in that hole.

Yes, dealerships CAN and WILL roll the amount remaining into the loan for you, and my credit is much better than it was before as well.

thesameguy
September 29th, 2014, 10:35 AM
The biggest depreciation hit comes in year one. A new car purchased now will more likely than not be worth significantly less than you owe in one year, and if you're rolling up $4-5k of negative equity from your current ride into that loan you don't have a prayer of a chance.

For example, a Toyota Camry (which has among the best if not the best value retention in the biz) will lose seven to nine grand due to depreciation, or around 30% of it's value, in year one. On a typical five year loan, you will have only paid off 20%, leaving you underwater about 10%. In numbers, if your bargain basement $22k Camry is a $26k Camry because you've rolled $4k of negative equity in the Scion in (and I think a $5k trade is *optimal*), you're going to owe about $22k on a car worth about $15k (assuming a 60mo loan at 3% and a $467/mo payment). You'll be another several grand underwater.

If you go for a longer term in order to reduce the monthly payments, the downside gets uglier faster as a bigger percentage of your payments goes to interest instead of principal. The "drive a new car for less than your current monthly payment" is always, necessarily, a lie - or at least a fudged truth with a bunch of asterisks.

Like others said, I don't think I'd even be entertaining this.

MR2 Fan
September 29th, 2014, 10:41 AM
The biggest depreciation hit comes in year one. A new car purchased now will more likely than not be worth significantly less than you owe in one year, and if you're rolling up $4-5k of negative equity from your current ride into that loan you don't have a prayer of a chance.

For example, a Toyota Camry (which has among the best if not the best value retention in the biz) will lose seven to nine grand due to depreciation, or around 30% of it's value, in year one. On a typical five year loan, you will have only paid off 20%, leaving you underwater about 10%. In numbers, if your bargain basement $22k Camry is a $26k Camry because you've rolled $4k of negative equity in the Scion in (and I think a $5k trade is *optimal*), you're going to owe about $22k on a car worth about $15k (assuming a 60mo loan at 3% and a $467/mo payment). You'll be another several grand underwater.

If you go for a longer term in order to reduce the monthly payments, the downside gets uglier faster as a bigger percentage of your payments goes to interest instead of principal. The "drive a new car for less than your current monthly payment" is always, necessarily, a lie - or at least a fudged truth with a bunch of asterisks.

Like others said, I don't think I'd even be entertaining this.

I didn't say new car, but newer used car ;)

thesameguy
September 29th, 2014, 12:03 PM
That changes things a little, but not much. You're still going to be paying +$4000 on top of a car's current market price. The car is still going to depreciate, and you'll still have an extra four grand to make up. In order to keep your payments the same, you'd need to be shopping a car that currently books out for about $14k (given 60mos/3%). At the end of the first year you'll still owe like $14k on a car that is now probably worth around $10-12k. You'll still be underwater, you'll have that much bigger of an anchor to move, and you're going to win maybe three or four model years and 20k or 40k miles. You'll still have an out of warranty car and an entire pile of unknowns. As they say, the devil you know...

Rolling negative equity into a new loan is never a good idea unless your car is actively on fire and you have no choice - that's my opinion.

MR2 Fan
September 29th, 2014, 12:28 PM
That changes things a little, but not much. You're still going to be paying +$4000 on top of a car's current market price. The car is still going to depreciate, and you'll still have an extra four grand to make up. In order to keep your payments the same, you'd need to be shopping a car that currently books out for about $14k (given 60mos/3%). At the end of the first year you'll still owe like $14k on a car that is now probably worth around $10-12k. You'll still be underwater, you'll have that much bigger of an anchor to move, and you're going to win maybe three or four model years and 20k or 40k miles. You'll still have an out of warranty car and an entire pile of unknowns. As they say, the devil you know...

Rolling negative equity into a new loan is never a good idea unless your car is actively on fire and you have no choice - that's my opinion.

Yeah, I tend to agree, that's why I came here, for expert advice :up:

21Kid
September 29th, 2014, 01:01 PM
Your current car isn't going to lose value as quickly going forward. And you don't know what types of maintenance a newer used car will need... on top of whatever loss you would take on it.

My $0.02 would be to stay with what you have and keep up with the maintenance until you are ready to move. Maybe by that time you'll have paid it down enough to break even.

neanderthal
September 29th, 2014, 05:24 PM
The payment isn't going to go away with a new loan. It just extends it. Better to swallow the bitter pill now.

Keep the car.
Do as much maintenance as you can on it.
100k is nothing on modern cars. My car is 19 years old and has nearly twice that. A coworker has ten year old Honda Civic with over 200K on it.
Pay off a little extra when you can.
When it's paid off, maximise your value by driving it into the ground. If you "pay yourself" the equivalent of the car payment while you're doing that you'll be ready, with cash, if this one gets terminal.

Godson
September 29th, 2014, 07:37 PM
The payment isn't going to go away with a new loan. It just extends it. Better to swallow the bitter pill now.

Keep the car.
Do as much maintenance as you can on it.
100k is nothing on modern cars. My car is 19 years old and has nearly twice that. A coworker has ten year old Honda Civic with over 200K on it.
Pay off a little extra when you can.
When it's paid off, maximise your value by driving it into the ground. If you "pay yourself" the equivalent of the car payment while you're doing that you'll be ready, with cash, if this one gets terminal.


This.

I bought the Denali for this exact reason.I have cheaper maintenance, a more reliable vehicle, and it is ultimately a better choice for my life. For where you live, the tC is a great commuter. I'd just concentrate on paying it off and driving it until the wheels fall of, but not skipping maintenance.

Yw-slayer
September 29th, 2014, 08:46 PM
Do you NEED a car? Can you do 90% of what you need to do by bike?

MR2 Fan
September 30th, 2014, 02:24 AM
Do you NEED a car? Can you do 90% of what you need to do by bike?

hahahaha!! My commute is 30 miles each way, yes, I need a car ;)

neanderthal
October 1st, 2014, 09:25 PM
This.

I bought the Denali for this exact reason.I have cheaper maintenance, a more reliable vehicle, and it is ultimately a better choice for my life. For where you live, the tC is a great commuter. I'd just concentrate on paying it off and driving it until the wheels fall of, but not skipping maintenance.

This is the most important part of this discussion. Keep up on maintenance and your car will last eons and eons. You're going to have to up the maintenance budget at some point to take care of stuff like suspension bushings, and other things that normally gets ignored until the car is just replaced.

My repair budget for my car is the equivalent of a lease on a Toyota Corolla, so $2400 a year. That covers a lot. A transmission replacement might be more, but, with the transmission replaced I have a few more years left in the car.
Now, if you paid attention, you'll notice I did NOT say maintenance budget. Maintenance is normal for any car, new or old. Oil changes, tire changes, brake pads, etc that's par for the course. Sure, an old car is going to be more expensive to maintain than a new one. But look at it from the view point of making a car payment on a new car you really want. A BMW 5 series will probably be $549 a month. A 3 series could be $300 a month.

Of course, if you pan to drive your car into the ground, it important that you like the car you drive. My car was last made in 1995. I still think it is one of the most beautiful designs, ever. It's purposeful, athletic, refined, restrained, it's classy. The engineering for it is also fantastic. Sure, a newer car has got better stuffs, yes, plural, but I like the total "fit" of my old one. It's not too big, it's not too small. It's not too overt, it's not too subdued. It's not garish or too fashionable, so it won't age too quickly. I'm actually looking at a 1995 E320 wagon right now to complement it.

Yw-slayer
October 1st, 2014, 10:31 PM
30 miles, pffft, some people ride that before breakfast (if it's flat, which I assume Florida is ;)).

Although I suppose even at at steady 30km/h (which is achievable on a decent road bike) you would still probably take just under 2 hours each way.

I agree with Mo on liking the car you're going to drive into the ground. Legacy speakers just got replaced, still love it.