Auto Loan 24.99%. Thinking about trading in.

[Anonymous]

So, a couple of years ago my husband and I made a pretty big mistake and took a auto loan for a used 12 year old car with a very high interest rate. The purchase price of the car was only 8,000 -ish and due to our credit being so bad, it was the only thing we could afford at the time and we were approved through one of those private "bad credit lenders". I know it's pretty ridiculous but when you've been without a car for over a year and you moved to a city with 6 days of serveral feet of snowfall and negative temperatures, we caved and took what we could get. This was most two years ago, and we are still paying on this car. I found a great deal on a recent 2016 jeep, and we've been thinking about trading it in. The payemnts would only be about 25 less per month than what we are paying now, and I know by trading it in we'll be upside down about 5,000 the car is literally worth 2500 at the most. It just kills me to think how much we are paying in interest, and at this rate we'd still be paying it for the next two years. His credit has improved so I'm sure he could get a lower interest rate. His FICO score is 620 obtained from Wells Fargo credit scoring.

Here are the full deets.

Current

2006 Nissan Murano for 7999 the went to 10,500 for taxes and a gap warranty that the dealer said wasn't optional.

24.99 % over a four year period.

351 monthly payment. Still owe about 7,000.

Kelly Blue book value 1500-2500

160,000 miles now, was 145,000 when we pruchased it.

Trade in deal

2016 Jeep Patriot $14,430

Low miles about 33000

Priced about 1500 under Kelly blue book Value.

Auto Loan estimate calculator has the payments at 321 for 72 months and some change with sales tax, fees, and the upside down trade in.

So myFico members whadda ya think? Should we trade in the car? Any advice would be awesome, thanks:-)

[Miner]

Have your credit scores improved since you got that previous loan?  Did you ever try refiing the existing loan at a credit union?  Can you afford making larger payments?  Can you cut back on eating out and other expenses to make larger payments?  Rolling over a negative equity can sometimes end up being a never ending process where you never get out and keep rolling more and more over with each loan.  I'd do anything else first if possible.

Given you are talking about a 7 year loan, that is even more of a reason to not do it.  Even at a lower interest rate, paying a loan off for that long of a period will still cost you a lot in interest in the first half of the loan where the principle won't decrease that much.  And Jeep/Chryslers aren't known for being the most reliable cars out there, so to get a 7 year loan with no warranty to cover that period may not end up saving you money.  You may be cursing the new vehicle in 3 to 4 years if you have to start paying for repairs and still owe a lot on the newer vehcile.  I would only roll over your negative equity if you can get a low mileage vehicle with an auto loan with a length of 5 years (stongly recommend even shorter) with payments you can afford without doing any stretching.  Please find a cheaper car.

I'll be honest, I would have never taken that loan you had no matter how desperate I was.  Even in a high sales tax state like CA or NY where it can be 10+%, you would have had to have paid almost $2k for fees and gap insurance which is more than 20% of the price of the car.  I would have walked away and bought a cheaper $2k-3k car as you can find some that aren't in bad condition. I know because I just sold one recently. 

[Anonymous]

1.) Get rightside up before you even consider getting another car. Better yet, pay off your Nissan and drive it til the wheels fall off. Cars these days go 250k-300k easy.

2.) 72 months is waaaaaay too long for any auto loan. If you have to go out that far, you are buying more car than you can afford. You will also find yourself upside down and in this same boat yet again.

[Kree]

I'm not sure anyone would roll your negative equity into a used vehicle. Generally the max loan people will give is bluebook +20%.  So if the new vehicle is valued at 16,000 the max loan (including taxes/fees) would be no more than 19,200.

My math says you would be looking for closer to 22,000.

[Anonymous]

If your credit has improved you should try getting a personal loan for the amount. You can pay the loan off and then drop full coverage as this is likely contraindicated in a vehicle with that value. This will save you some money possibly and avoid you going further into debt

[Anonymous]

Rolling negative equity is always a huge no no!! like others have stated just because the interest rate is lower does not mean you won't pay a lot of it especially at 72 months unless it is at 0%. That is what i did i got a new car at 72 months for 0% and i am doubling my payments since all goes to principal i will pay it off in half the time but i am not committed to a larger payment. Also factor higher insurance cost as well not just the monthly car note. If anything else above fails see what lease options there may be. My Brother in Law did a lease on a car that was upside down  for the same amount that he needed to do major repairs and he got a lease on a new car payments were about 70 dollars more a month but after the deal ended it would have absorb the negative equity, walk away with it after 30 months and start fresh again. You need to weigh all your options and not just go by what an "estimate calculator" states. Call your insurance co and ask how much would it cost you with this new vehicle, shop for extended warranty if you go with a used car if you want, and lastly make sure a lender would let you get a LTV % as well since some cases that number is lower on used cars "risky lending".

[Anonymous]

Don't. While that generation Murano isn't the most reliable vehicle out there it's still better than anything from FCA (Fiat Chrysler).

Yes you're getting into a newer car but that newer car will soon be out of warranty. It's no fun to be paying that interest but it's still better than another 6 years of payments on a vehicle that'll be worth less than the Nissan at that point.

[Anonymous]

Also, 33,000 miles is high for a 2016. The average is around 12,000 per year so the Patriot should have just over 24,000 on it to be considered average miles and even less to be considered low mileage.

FYI Patriots are known for transmission issues, unless they have fixed that issue in the last few years.