Car Financing Questions

[hopelessbutno]

I could use some help

Ok, lets say I have a car that I want to trade in to a dealership but it's not paid off yet. I owe more than what I could get from a dealership.

The dealership im buying from would pay off my current car, add that amount to the price of the new car, and would I then trade my paid off car to the dealership and they would reduce the price of my new car by how much my old car was worth?

Im extremely stupid so all help is appreciated.

[Coop '02Z]

be careful

Their job is to get you in a car not to help you financially. What they will do is get you a loan for the price of the new car plus the amount that you still owe on your old car after the trade in value is decided. Don't get caught up in the new car frenzy and do something without thinnking. The main problem with what they want to do is you now owe more than what your new car is worth. That was your problem with your previous car. If you factor in depreciation (which starts as soon as you sign) you are going to be WAY upside down on the new loan. So unless you are going to keep the new car until it's paid for, don't do it, or you will be in the same boat you are in now if not worse. that was long winded, hope it made sense.

Good luck

[Joe 1320]

All that basically happens is that you trade in your old car, you get a certain amount on trade and whatever unpaid balance from your old car is added back in to the amount financed. For example:

Purchase vehicle X for $30,000
Trade vehicle Y - 10,000
trade difference 20,000

unpaid balance on Y +15,000 (added to new loan)

New loan amount = $35,000


When trading in a car that you owe more than it's value, you get shafted.

[Coop '02Z]

yup

yeah waht Joe said...

[tabahr]

idea

You would get more for your old car if you sold it privately. I dont know how badly upside-down you are in it, but any way you cut it you will get more money for it privately than on trade.

Personally, I cannot stand car loans. I prefer to save a few hundred a month for a year or so, then pay cash. Tax refunds, bonuses, etc.... it all adds up and then you can buy something wothout worrying about loans.

To get my current Z, I sold an 88 IROC for 4,000 and added my tax return check (3,000) to it, in addition to a grand I had saved up over a few months.

8 grand, and I was all set. no car loan. Driving a car you own outright is more rewarding to, even if it is used. It always used to bother me when the bank owned it. New cars are nice, but if you add up the cost of ownership over the life of the loan, you are getting shafted bad!

Example 1... You pay 30,000 for a car. 5 years later, after it is payed off with 5% interest you have payed 31,500 for it, and it is worth maybe 10,000 at this poit in time if you are lucky.

it cost you 21,500 to drive that car 5 years. that is $358.00 per month.

Example 2... I paid 8,000 for my 94 Z with 50K on it. in 5 years it is worth, say 6,000.

it cost me 2,000 to drive that car 5 years. (plus some for reapirs, because it is not under warrenty) so figure 3,000 to drive it 5 years. That is $50 per month.

That is $308 per month savings. Is it really worth an extra $308 per month to drive a newer car? I say NO WAY.

[briantech]

Seems to me then that the problem is buying $30,000 cars in the first place. Taking out a loan for $8,000-$10,000, buying a used car, and over the course of 5 years having it drop value by 2 grand isn't that big of a loss. The problem isn't the loan, the problem is buying a new car.

[gimp19]

Re: idea

Originally posted by tabahr
You would get more for your old car if you sold it privately. I dont know how badly upside-down you are in it, but any way you cut it you will get more money for it privately than on trade.

Personally, I cannot stand car loans. I prefer to save a few hundred a month for a year or so, then pay cash. Tax refunds, bonuses, etc.... it all adds up and then you can buy something wothout worrying about loans.

To get my current Z, I sold an 88 IROC for 4,000 and added my tax return check (3,000) to it, in addition to a grand I had saved up over a few months.

8 grand, and I was all set. no car loan. Driving a car you own outright is more rewarding to, even if it is used. It always used to bother me when the bank owned it. New cars are nice, but if you add up the cost of ownership over the life of the loan, you are getting shafted bad!

Example 1... You pay 30,000 for a car. 5 years later, after it is payed off with 5% interest you have payed 31,500 for it, and it is worth maybe 10,000 at this poit in time if you are lucky.

it cost you 21,500 to drive that car 5 years. that is $358.00 per month.

Example 2... I paid 8,000 for my 94 Z with 50K on it. in 5 years it is worth, say 6,000.

it cost me 2,000 to drive that car 5 years. (plus some for reapirs, because it is not under warrenty) so figure 3,000 to drive it 5 years. That is $50 per month.

That is $308 per month savings. Is it really worth an extra $308 per month to drive a newer car? I say NO WAY.

I agree new cars are a waste of money and they are often a dime a dozen. With most newer cars by the time you are 1/2 way through the loan you still owe more on the car then what its worth.

Atleast used F-bodys are starting to hold there value.

[tabahr]

Originally posted by briantech
Seems to me then that the problem is buying $30,000 cars in the first place. Taking out a loan for $8,000-$10,000, buying a used car, and over the course of 5 years having it drop value by 2 grand isn't that big of a loss. The problem isn't the loan, the problem is buying a new car.

Good point. Do banks loan money for cars older than 5 years?

[Joe 1320]

Originally posted by briantech
Seems to me then that the problem is buying $30,000 cars in the first place. Taking out a loan for $8,000-$10,000, buying a used car, and over the course of 5 years having it drop value by 2 grand isn't that big of a loss. The problem isn't the loan, the problem is buying a new car.

Whoa... been there done that and you are right. I've gone the route of new cars and won't do that anymore. The only ones that seemed to hold a better initial resale value were the Corvettes.

I like to pick up a car that is perhaps 5-7 years old, needing a few minor repairs that someone is selling cheap. I do the work, drive it for a few years and sell it for what I've got in it. It sure helps to be able to do all the work yourself. I've done that with countless cars.

[furyus65]

IF you do decide to buy a new car adn you are upside down (heck if your not upside down but will be when you drive it off the lot) buy GAP insurance. this insurance is on top of yoru comprehensive collision and liability insurance but your basic insurance will only cover the ACV or Actual Cash Value, GAP insurance covers the difference between the value of yoru car at teh time of loss and the loan value so that you can start fresh with no debt after a total loss.

This coverage is usually used on cars brandnew to two years of age but talk with your insurance agent about it.

[briantech]

Good point. Do banks loan money for cars older than 5 years?

When I was buying mine, most loan places required the car to be a '97 or newer with less than 75000 miles. So I guess the standard amount is 6-7 years (since its 2004 now basically)