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Should I?

I have a car. I like it. It's a small car, with enough power to make it zoom along at an agreeable pace. It has four doors, and can competently traffic me to various places around the nation, barring traffic law abuses on my part. I financed what was left of the ridiculous amount I still owed on the old car, which was inordinately high because of how upside-down I was on the car previous to that. Through continuous overpayment of my loan, I owe 11,000 dollars on my car, when I should owe about 13,000 dollars. My monthly payment is somewhere in the three hundreds(driven down from the four hundreds by overpayment), but I usually pay about five hundred, which accounts for this difference in the remaining principal. The amount that was financed with my current car was just over 25,000 dollars.

In an effort to keep sales moving, the car dealership has mailed me a notice informing me that, upon certain conditions that my car meets, they would give me about 13,500 dollars for it, if I trade it in for a new car. I just priced a car on the manufacturer's website, and found that a new car with the options I want, would cost about 17,500. So, in the following scenario:

13500 (apparent trade-in value of my car)
- 11000 (what I owe, not including interest)
2500 ("profit" from the trade-in)

17500 (what I priced on the manufacturer's website)
- 2500 ("profit" from trade-in that effectively gets turned into a down payment)
15000 (amount to finance)

My payments would be lower(and hence, easier to pay off), my taxes and insurance would likely go down, and I'd have a new, better car. Does it seem like a good deal? What do you think?

1:50 PM, Aug 30, 2007

18 comments

ck was sure you'd want to know:

Don't forget taxes and fees that will probably add another %10 to your estimated cost. I'd say keep your current car as long as it's running fine.

How long of a term do you have on your current loan? It sounds like you're going to end up paying in the neighborhood of $30,000 for a car that I'm guessing brand new runs in the low 20s. You're turning a black hole into a deeper black hole by financing that much on something that does nothing but depreciate from day 1.

3:09 PM, Aug 30, 2007

bahua said:

No, I've managed to pull myself out of the black hole. As I said in the entry, I was very upside-down on my first car, and wound up financing that into the loan for my current car. The car I have now technically didn't cost me anything, since I paid less for it than I got for my trade. What I really did was just refinance the previous balance.

That isn't the case now. I'm right-side up on my car, and can actually get more for it than I owe. The car that I've priced online actually has a lower price than my current one. Again, as I said above, it's about $17,500, minus the difference on my trade-in, which brings it to about $15,000. The only other expense having to do with purchasing the car would be the sales tax on the principal amount($15,000), which should be about $1000. That'll come out of pocket, all at once, since they won't bundle it into the financing.

The bottom line, as I see it, is a lower payment for five years, or the same payments that I'm making now, but with the term ending at the same time as the car I'm paying for now.

5:47 PM, Aug 30, 2007

Jack Miller Subaru replied:

YES

10:40 PM, Aug 30, 2007

Brad said:

My guess is...this picture won't work.

<img src="http://www.bradschmitt.com/lambo.jpg">

11:27 PM, Aug 30, 2007

Brad responded:

damn.

11:27 PM, Aug 30, 2007

Alexjandro interjected:

Sell your call, and don't buy a new one. Take the bus for a while, and I heard a rumor that KC was creating a network of tubes for human transportation. Once those come into play, cars will have no value. Save you money, and wait for the TUBES!!!!

2:17 PM, Aug 31, 2007

Rachel commented:

you don't need a car, sheesh, who's the public transit advocate, now? I don't mean "now" as opposed to "back in the days you didn't have a car," 'cos those days didn't really ever exist save college (sorta), but just, uhhhhhhhh

maybe someone else will find my tangent

don't live in the suburbs --- check

don't work in the suburbs --- check

you don't need your money-sucking device any more. sell your car, get a bike to get around to neighborhood places, reap the benefits, make extra payments on your actual equity earning investment, and buy me a dog/ping pong table. whoo!!!

1:18 AM, Sep 1, 2007

Listen to Rachel offered:

nice to see you have new car fever but reconsider a few key points. the value to consider is what you'll find in the dealer's NADA "black book". There's a separate book on actual "cost" (whatever that means) of the new ride.

Consider also that your insurance and taxes will likely go UP, not down. Remember that since you're talking financing that the interest rate on the loan may go up or down, but you must find out how they're calculating the rate and the payment. Likely you'll have some sort of compounding, rather than 'simple' interest. Either way ... you pay, not the seller or the bank. That's how they end up rich and the rest of us end up paupers.

Final thing to remember is since you're in a high crime area your new ride will only be with you for a short while, so take the advise of your other friends and use the metro or bike. Your heart will thank you for it.

11:38 AM, Sep 4, 2007

Jeff wants you to know:

the correct answer is: no

your payments would be lower because you're taking a larger amount (15,000 vs 11,000) and spreading it out over a longer period, right? you'd end up paying more in the long run (interest, etc) then finishing this one off.

also, be leery about those "certain conditions" they'd require you to meet. they're often pretty particular. you would probably meet some, but maybe not all. kind of like those 0% offers a few years back...only about 10% of the population would qualify for those (and they were generally the same people who could just buy the car outright).

1:20 PM, Sep 4, 2007

dick chimed in with:

such ridiculous thoughts from the biking community. it would take me over an hour to list the hundreds of reasons owning only a bike is a horrible idea. not to mention one of the bike advocates above OWNS a f'in car!

the financial aspect is only a fraction of the grand scheme.

besides, i can't even begin to picture john riding a bike. sorry, john. us dudes over 200 lbs dont ride bikes.

3:55 PM, Sep 4, 2007

bahua thinks:

Ridiculous Commenter: "high crime area?" WTF? I don't live in Gary, IN. I live in a nice neighborhood. Are you actually, with a straight face, alleging that since I live in the 7th level of Hell, a (GASP) DOWNTOWN area, that it's only a matter of time before my car gets _stolen_? Are you high? Have you ever actually _been_ downtown? Have you ever actually _ridden_ a bus or a bike? I have lived downtown for four years, and never once have I had any trouble with crime, much less with my car. I understand that the insurance rates are higher for downtown areas, but I'm already paying them. I haven't been dishonest with my insurance company. They know that I live in downtown Kansas City, and are charging me accordingly for a two-year old car.

To address the non-ridiculous comments: Dispensing with the car, while I love the idea, is not an option in Kansas City. I need a car to live here. I work out in the suburbs, and that can't be helped just now. But even if I didn't, I'd still want to keep a car.

I have given up the idea of getting a new car, not for the expense(which I have already shown will not be an issue), but because I don't want to go through the hassle of dealing with the state for a new car, and because I do like my current car.

"high crime area?" Give me a break!

4:15 PM, Sep 4, 2007

dick was sure you'd want to know:

"also, be leery about those 'certain conditions' they'd require you to meet. they're often pretty particular. you would probably meet some, but maybe not all. kind of like those 0% offers a few years back...only about 10% of the population would qualify for those (and they were generally the same people who could just buy the car outright)"

your credit score has absolutely nothing to do with income, at least in the calculation.

every time i go downtown i get mugged. not you, john?

4:23 PM, Sep 4, 2007

Jeff wants you to know:

erik, are you sure you're participating in the same conversation the rest of us are?

and john, i think your comments to Ridiculous Commenter are misplaced. most urban areas are classified as high crime by some actuary at a desk. most folks will see their rates go up when moving from the suburbs to a more urban area. but the whole topic doesn't really have any relevance since you already live there and expect it.

4:54 PM, Sep 4, 2007

dick responded:

jeff,

do tell where i'm off base

7:45 PM, Sep 4, 2007

bahua thinks:

Jeff, you said exactly what I said. I've stated and fully understand that where I live makes for higher insurance rates. That appears to be the sentiment you're defending from Ridiculous Commenter. That is not a compelling reason not to purchase a new car, since I'm already paying the high premiums. It will make no difference to me.

I was responding to Ridiculous Commenter's sentiment that since I'm in this "high crime area," that I have only a limited time to even possess a new car. That is an absolutely ignorant statement.

10:14 PM, Sep 4, 2007

Alexjandro interrupted with:

I thought the "Ridiculous Commenter" was joking..... John, either learn to take a joke..... or if it wasn't a joke, get less rediculous people to make comments.

9:45 AM, Sep 5, 2007

Rachel cut in with:

lol at your non html enhanced formatting john

7:01 PM, Sep 6, 2007

Cole brooked no delay in saying:

Honestly, what car would you have gotten for 17,500 (plus whatever) that would be better than your car now? like a scion or something? don't do it. I think the subaru is a tier above that price range in everything. Just finish off your payments and drive it until the wheels fall off. It's not like there is anything wrong with it, and you don't put that many miles on it, and it doesn't look bad or have a burgundy interior.

11:18 PM, Sep 12, 2007

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