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Trade in or Just pay it off?

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Anonymous
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Trade in or Just pay it off?

So back before I cared about my credit (before I even know about myFico) I made a horrible decision to purchase my current car  with a interest rate of 21%!!! Smiley Surprised Now that I'm much more credit knowledgeable...thanks to this board....it's about time for me to get another new car. My question is based on the below scenario would you just pay out the balance or go ahead and see what you can get and trade it on in (rolling over any potential balance into the new car)?

 

 

Current credit score EQ auto enhanced is 672, Exp is Frozen but last was 633 and same for TU. I've just paid down 2 maxed cards and a few other cards that were killing my utilization (to 30% and lower), so I'm waiting on another score update anticipating a nice bump. I have 1 other paid off vehicle and 1 late on my current vehicle from about 3 years ago. Otherwise no big issues. 

 

Currently I have about 3800 left on my car

The car is a 2010 base Mustang with about 140k miles 

The last appraisal I recieved was at around 3500k, at this time I found out the car had frame damage before me, and I have been in 2 accidents myself in the car. 1 at fault, and 1 not at fault. Also, I was recently hit by another car in a parking lot (I was not in the car at the time.) leaving a dent in the rear bumper of the car ...so pretty sure the car is not valued at to much. 

 

At this point would it be best to swallow whatever the negative equity may be and roll it into the new loan (considering the amt rolled over shouldnt be much and the new interest rate would be MUCH lower)?

 

Message 1 of 6
5 REPLIES 5
Anonymous
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Re: Trade in or Just pay it off?

I'd say pay it off if it's driveable and run it into the ground while saving up money to make a 20% down payment on your next car and make sure the next car is something you can afford to pay off in 24-36 months MAXIMUM.

Message 2 of 6
Anonymous
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Re: Trade in or Just pay it off?


@Anonymous wrote:

I'd say pay it off if it's driveable and run it into the ground while saving up money to make a 20% down payment on your next card and make sure the next car is something you can afford to pay off in 24-36 months MAXIMUM.


^^^DING DING DING

 

Take this opportunity to get ahead and never be in an underwater auto loan again. A car less than 10 years old is good for 200k EASY.

Message 3 of 6
Anonymous
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Re: Trade in or Just pay it off?

Also, I should mention this: if your only open installment loan reporting is that auto loan (meaning, no mortgage, personal or student loans or other auto loans), you should consider doing the Alliant SSL Technique now so that when you do pay off your auto loan and start loan apping, you'll have the strongest FICO score possible: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

 

Message 4 of 6
Anonymous
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Re: Trade in or Just pay it off?

Thank you, I kinda needed to hear this. The transmission is slipping (was replaced a couple of years back with a used one). However, I think I'll keep it as long as I can go. 

Message 5 of 6
Anonymous
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Re: Trade in or Just pay it off?

Mustangs from that era have transmission slipping issues pretty commonly around 70K miles or so, I believe.  Remanufactured ones tend to have the same issue around that point.

 

Do some research on the cost to throw another one on there (shop around, too).  You might luck out and be able to throw $1500 at the transmission and get another 70,000 miles out of it!  Way cheaper than the depreciation cost of any new(er) car!

 

You almost never see financial issues or credit issues with auto loans that have 20% down, even with higher interest rates.  The majority of auto loan problems come from high interest rates and zero down payment.  So saving up enough to be able to put 20% down will have a huge effect on your affordability factor going forward.  Also, 20% down can qualify you for a better interest rate even with good credit.

Message 6 of 6
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