05-13-2008 05:15 PM
05-14-2008 08:38 PM - edited 05-14-2008 08:39 PM
Really it depends on your credit scores. Yes you can roll the 3k into a new loan but not the smartest thing to do. You're basically upside down on the loan. Do you have the 3k by chance? Your credit score will take an impact from the inquiry but will get better soon with on-time payments. As far as the purchasing the house, again we need to know your scores, any baddies? any lates? a bk?
firstinlastout wrote: I owe 19K on my car. It's a 2005 GTO 6.0 V8 with 400 HP. Due to the gas prices with no relief in sight, I want to downsize to a Toyota Yaris. I owe 19K on the car and according to edmunds.com, the dealer trade in value is 16K. That's 3k that I owe that will be tacked onto the price of the Yaris. I can get a pre-owned 2007 Yaris with 9k miles for 12k. So 12k + 3K would be 15K. The amount of car debt I owe would drop to 15k. Here is the catch..I am trying to pay off credit card debt and improve my credit score as much as I can since I am going to buy a house in December/January. Should I wait until then to buy my Yaris ? Or should I buy it now ? How will buying another car...but effectively lowering my loan amount effect my credit ? Thanks !
05-15-2008 02:12 PM
05-21-2008 09:09 AM
Great advice! BTW $3.50 a gallon? I envy you... I paid $4.25 yesterday..
Well it won't change your credit mix. The new inq and new loan will be a slight hit but the overall affect 8-9 monhts from now should be minimal. IMHO if you don't complete the sale soon I would wait until after buying the home. You wan't no new debt in last 6 mo from when they pull credit which will be slighly before your purchase (if looking for pre-approval letter). So by mid June if you haven't bought it I would wait.
The change in loan amount doesn't matter. FICO doesn't care what total loan amount is just how much you have paid down and how long loan has been open, and how good payment histroy has been. In this case you are replacing a loan with ??? number of good payments and a balance of $19K and original balance of ??? with a loan that (by time you are buying house) will have 6 reported payments and a balance of $13-14K on $15K loan.
You likely are looking at an overall small hit to credit score by the time the broker pulls your credit in late Nov. How much that matters depends on you. If you are right on the bubble (say middle score 700) I would wait. Even a 1/4% higher rate on your house isn't worth it.
Lastly the net "savings" likely are not as much as you think. According to EPA you GTO has an avg MPG of 19 and the Yaris has a 32. Figure you drive 12K miles in year.
GTO = 631 gallons of gas
Yaris = 375 gallons of gas
Savings = 256 gallons
At $3.50 per gallon thats ~$900 saved per year.
HOWEVER to save $900 it will require rolling $3K in negative equity and losing about another $2.5-$3K in equity on Yaris (the Yaris is "worth" trade-in value = $9,700 in my zipcode but you are paying $12K). Add all that up plus the interest on a now longer loan (compare remaing mo on existing loan to total length of current loan).
Likely end results is not much of a savings even though it will "feel better" at the pump you will be paying more for longer on a car not worth as much.
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