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Paying way too much for a car loan

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bill1971
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Paying way too much for a car loan  Reply with quote  

My girlfriend of 14 years and I bought a car a year ago in November. Our payments are almost $600 a month. I tried to refinance but couldn't get a better deal because the equity in the car isn't there. Do car dealerships buy the car back, get a less expensive car and we just have to "eat" the difference, but at least it could be paid off quicker. It was a 6 year loan.

Thank you. My 1st post here.
Post Tue Jan 17, 2017 10:20 pm
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oldguy
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Yes, dealerships will buy the car back - but they can only pay current value, minus the salesperson's commission, registration, title change, clean-up. Depreciation is the largest factor, maybe $4000 already.

You probably paid about $40,000, your payments will total about $43,000. Ie, the cost of your loan is only about $3000. Compared to a 10 year depreciation cost of about $38,000.

I bought a 2017 a couple months ago, $38,000. The old car was a 2006 with 205,000 miles, the trade-in value was about $2000. (Same make and model). So my depreciation cost was about $36,000 for the 11 years, ie about $3100/yr. The cost of the loan was about $3000/yr for 5 yrs, ie $600/yr...

In your case you would be signing up for a reset on the depreciation - an extra $4000. And saving about a year in interest, ie about $500.

BTW, what's the rush to pay it off earlier? I keep my car loans for the full term - and keep my own money available for investing..
Post Tue Jan 17, 2017 10:48 pm
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bill1971
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quote:
Originally posted by oldguy
Yes, dealerships will buy the car back - but they can only pay current value, minus the salesperson's commission, registration, title change, clean-up. Depreciation is the largest factor, maybe $4000 already.

You probably paid about $40,000, your payments will total about $43,000. Ie, the cost of your loan is only about $3000. Compared to a 10 year depreciation cost of about $38,000.

I bought a 2017 a couple months ago, $38,000. The old car was a 2006 with 205,000 miles, the trade-in value was about $2000. (Same make and model). So my depreciation cost was about $36,000 for the 11 years, ie about $3100/yr. The cost of the loan was about $3000/yr for 5 yrs, ie $600/yr...

In your case you would be signing up for a reset on the depreciation - an extra $4000. And saving about a year in interest, ie about $500.

BTW, what's the rush to pay it off earlier? I keep my car loans for the full term - and keep my own money available for investing..


Thank you. I am not in a rush to pay it off, the $600 a month payment is killing us.
Post Tue Jan 17, 2017 10:59 pm
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oldguy
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quote:
the $600 a month payment is killing us.


Oh, sorry, I missed that when I read it the first time.

It's nearly impossible to 'trade down' without taking a huge financial hit, your year-old car probably lost over $4000 in value.

Do either of you own house? If so, you could refi, get a 4% 30 year home loan. - a $10k loan payment would be about $48/m, a $20k loan would be $96/m, and so on. Then use the money from the house to lower the car loan, then refi the car to a smaller amount - something like $20,000 for 7 yrs, that payment would be $275/m. That, plus the extra $96/m would be $370/m (compared to the $600/m that you now pay.

And then keep the car for about 200,000 miles - that will help to control your car ownership costs.
Post Wed Jan 18, 2017 2:17 am
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bill1971
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No we don't own a house. We have made some bad decisions in our lives and are trying slowly to right the ship. Thank you for the advice. It is appreciated.
Post Wed Jan 18, 2017 3:40 pm
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