Trying to reduce monthly expenses - what is the best option?

[Anonymous]

We have two cars.  One with a car payment of $200.  When we bought this car we didn't trade a car in, we just put a downpayment and financed it.  Still owe about $5k and it's worth about $7k.  Bought it in 2008.  

Our other car is a different story.   We bought this one in 2007.  At the time I had just started a new job and the car I was driving had been the victim of a couple of recalls and bottom line it was a piece of junk by the time the dealerships got done "fixing" it.  At that time I owed about $3k more than it was worth.   The dealership was telling me that it needed another new engine.   I felt trapped at the time and traded it in on a cheap, reliable slightly used car and had to roll the $3k into the new loan.   So, my car payment on this car is $530.  Had to add gap insurance as well which made the car payment even higher so I have the car payment of a BMW but I drive a Nissan Sentra.   Well now that I have paid on this car for 3 years I am now about even and owe about what it is worth but still have 2 more years on the loan.

Now that you have the history.......I have been looking at my expenses and trying to identify where I can cut.   My car payments (in total) are my largest monthly expense.  I have looked online at some pricing and I can get a new or slightly used car for about $330 a month.   My thought was that I could trade in the Sentra for a car with a $330 monthly payment (reducing my monthly payments by $200) and use my bonus coming up to pay off the other car that we owe $5k on.   In total this will reduce my monthly expenses by $400.   I know that my insurance will go up a little if I go from a 2006 to a 2010 but definitely not by more than $40 per month.  Still reduces my monthly expenses.   As a side note, the Sentra has 115k miles on it and if I keep it for much longer I will have some pretty big expenses in repairs coming up.

So based on all this I would like some input on everyone's opinions regarding my logic in all this.   Would this be a smart move financially (assuming a dealer will pay it off and not lump an extra amount in on the new car I buy)?

Thanks for your help.

[Anonymous]

(assuming a dealer will pay it off and not lump an extra amount in on the new car I buy)?

Sorry  but the money comes from somewhere, any difference between what the vehicle is worth and what you owe gets rolled into the new deal.

A dealer has to pay a traded in car off so that they can then sell or dispose of it. Your negative equity is created by your actions in both the cars purchase and use, they are not going to take a loss on that.

I would look for other cash savings options, I doubt a 115K mile car is worth what you think.  A 530 car payment by the way is not that extreme. In all honesty I would use a debt snow ball to pay both vehicles off using your bonus and other cash savings, pay for repairs and keep both behicles running until they are ran into the ground, and then go from there.

[Anonymous]

Apparently I didn't make myself clear in my original post.  I have already checked with dealerships on the value of my trade in.    I am at the point that I am even on this car - I owe just what it's worth.   Assuming that I can trade it in for exactly what it's worth I am wondering if it would be a better idea to go ahead and trade it in instead of paying on it for 2 more years ($520 per month) + the cost of repairs.   And yes, I have already talked to dealerships and received quotes on the car that I had in mind and based on that price my car payment would go down from $520 per month to ~$330 per month.  

[Anonymous]

---

@Anonymous wrote:

Apparently I didn't make myself clear in my original post.  I have already checked with dealerships on the value of my trade in.    I am at the point that I am even on this car - I owe just what it's worth.   Assuming that I can trade it in for exactly what it's worth I am wondering if it would be a better idea to go ahead and trade it in instead of paying on it for 2 more years ($520 per month) + the cost of repairs.   And yes, I have already talked to dealerships and received quotes on the car that I had in mind and based on that price my car payment would go down from $520 per month to ~$330 per month.  

---

Assuming you are out no more additional money then a few thousand, do the deal

[Anonymous]

"Out a few thousand"?  How would I be out a few thousand?