@Dj4Money wrote:
@StartingOver10 wrote:
I have an issue with this statement you made in the above post: Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important
Naturally the conclusion is good - interest rate is important. But the I'm sure the statement regarding the economist is that 'no more than 12 to 36%' if the statement has any validity at all.
- It is crazy talk to have a 36% of your income spent on a vehicle - think about it. The ideal number would be zero on a vehicle because of all the other required expenses: insurance, fuel, maintenance and repairs
- However, many of us are not in the position right now to pay cash for a vehicle so a loan helps, but not when it is 1/3rd of your income, then the loan hurts more than helps
For the OP, you are buried in negative equity because of the terms of your current loan and the original purchase price + the low down payment. Don't compound your issue by trading in and passing the negative equity to the new vehicle.
Actually Consumer Reports recommended up to 36%. I have seen articles on MSN Money and other places that say similar things. Only the MSN article is more conservative at 12-15% of income.
I didn't say I agreed with it, I found it provoking. I agree with Kiplinger and MSN Money = 10-12%, maybe 15%. of NET not GROSS.
I agree that factors have to be near perfect for you to spend a 1/3 on a vehicle but regular people spend up to that much and often does lead to financial disaster.
While the OP would be passing on the negative equity in the car, the obvious drop in interest rate, combined with aggressive negotiating tactics would lead to a better deal and car with a full warranty.
The alternative is to purchase an extended warranty and stay on top of the maintance of the current car (Jetta). The other is to step way down, think Chevy Spark, Nissan Versa sedan, not horrible cars.
That said the Versa sedan handles terribly with the sof t suspension and rock hard tires. I think you can get a Nissan Sentra for around $16,xxxx, basic equipement and maybe have to learn how to drive a stick, it's a much better car than the Versa.
Assuming the least expensive Cruze with Automatic (LT1), $2,500 rebate on 2014's, $2,000 down to cover tax/license and rolling the balance of the Jetta into the new car would come out to around $338 a month for 72 months.
With some agressive price negotiating, the OP can knock off another $5-10 a month off that.
I don't have an idea what the OP is paying currently but they could get a new Cruze, Dodge Dart Limited or Chevy Sonic LT Turbo Sedan. Payment would be roughly the same on all of these.
That isn't quite what they said. They said that your ENTIRE DTI (including housing and all other payments) should be no more than 36%
