Quote:
Originally Posted by investingdad
This isn't neccessarily the best decision for the OP. He needs to weigh his potential loss of selling upside down versus his ultimate savings by getting into a far less expensive car.
It's a matter of being out a few grand all at once right now, or 20 grand over the lifetime of the loan.
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Pure speculation on my part. I could be WAY off....
From my view the financial situation at home is such that he most likely doesn't have a ton of extra cash laying around to pay off the $4-7k that he will owe upfront. Then he still need to go out and buy another car, either cash or start another loan. I doubt again he will have the cash upfront to buy out right a 'reasonable' DD car. This leads to going to a dealer to trade in the car which will get him the least amount for his current car versus selling private. So he takes a hit on the car and just rolls the negative equity into the new used car that he buys. Used car rates aren't great here (have no idea for where he is) so he will be paying a higher rate on the used car on top of rolling in the money lost on the trade.
For every $1000 of purchase price is usually about $20/mnth of payment (rough numbers from when i sold cars last). So lets say he's $6k upside down, that means he's paying $120/mnth on top of whatever he pays for a used car. Lets say he buys a $10,000 car which for most people is pretty reasonable, that $200/mnth +120 from the last car = $320/mnth.
In the end he's saving $150/mnth give or take. But you then have to take into consideration that an older car will need more maintenence than his new one which will offset some of the savings.
So is it worth it? Thats his decision in the end.
This is one reason why dealing in cars sucks so much because you never win with cars. Its always downhill (unless its a classic that is).
My best friend bought a 2004 Pilot last October. Paid $29k for it. Threw $5k down on it made his $550 payment for a year then sold it for $23k and had to pay out $3-4k to the dealer because he was upside down. That means it cost him $5,000 deposit + 12x $550 payments + $3-4,000 buyout to own the car for ONE YEAR!!! Thats over $15000!!! Retarded. Then he bought a 2000 Odessey for $3000 cash. Now he's saying "wow its so easy to save money without that payment now..." but he doesn't realize he's got to save for like a year of no payments to get back his deposit, then another 6months to get back what he paid out at the end of the load.... He doesn't get it, he's owned more cars in the last 4 yrs than I can count and LOST on every single one of them. Its insane how much gets thrown away.