Upside down. What would you do?

[masscredit]

I'm looking at a vehicle that could turn out to be a very good deal. Price should be in the $17k range for a 2011 with 8000 miles. NADA is close to $22k and I'm upside down on my current loan by about $3k because of a high interest rate when I first bought it. I can roll thatamount into the new loan and and still be within NADA value. My interest rate will only be about 1.9% so it won't be costing me much money or... I could use a 3.99% BT/cash advance check then pay that off seperate in about 2 months. 

I'm not a fan of rolling one loan amount into another but given the sales price/value, might be worth it for this car.  Can go either way with it though. Payment difference would be about $44.00 per month. 

Yes, I know I could wait and pay it down. I wasn't looking for a car. Just kind of came across this and I think it's going to be something good so I really don't want to wait and miss out. 

[Hoya08]

A payment difference of $44 per month?  Are you comparing the current payment to the new $22k plan?  How many months are you looking at? 

Based upon a 60 month loan at 1.9%, $22k is ~$384 and $17k is ~$297... a $87 difference.

On a 48 month loan at the same rate, it's ~$476 and ~$368, respectively... a $108 difference.

It's better to to "roll" the $3k into the new loan and then pay $3k (in addition to the normal monthly payment) towards the principal of the loan in 2-months; just like you had  you planned to pay off the BT.

However, how will you be disposing of the current car?  Trade-in or private sale?  If it's a trade-in, you're gonna require much more than $3k.  If it's a private sale, you may come out ok, not great, but better than trading-in.

Some points to consider though: do you no longer like your car?  And are the savings in interest payments (if any) enough to buy a new car?

[masscredit]

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@Hoya08 wrote:

A payment difference of $44 per month?  Are you comparing the current payment to the new $22k plan?  How many months are you looking at? 

Based upon a 60 month loan at 1.9%, $22k is ~$384 and $17k is ~$297... a $87 difference.

On a 48 month loan at the same rate, it's ~$476 and ~$368, respectively... a $108 difference.

It's better to to "roll" the $3k into the new loan and then pay $3k (in addition to the normal monthly payment) towards the principal of the loan in 2-months; just like you had  you planned to pay off the BT.

However, how will you be disposing of the current car?  Trade-in or private sale?  If it's a trade-in, you're gonna require much more than $3k.  If it's a private sale, you may come out ok, not great, but better than trading-in.

Some points to consider though: do you no longer like your car?  And are the savings in interest payments (if any) enough to buy a new car?

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Just ran what I think would be close to the exact numbers.  If I finance $19k for 72 months, the payment would be $282.  That's with a rate of 2.24%. 1.9% would be for 60 months. I rather go long and pay more than have a higher payment for a shorter term. Financing $22k would be $326. per month. 

My current payment is $235.  Interesting tidbit, the bank offers a .25% rate reduction for vehicles that exceed a certain MPG. This is a hybrid so it would qualify. 

I'd probably just trade the car in. I could get an extra $1500. if I sell it myself. The thing is... how long would that take? And, if I keep the car to sell it myself, would the bank give me a loan for a second car?  I could take a day and shop the car to a few differnet dealers to see what they offer. Maybe it would be higher than what the dealer that has the car I'm interested in will offer. That is an option. 

[Hoya08]

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@masscredit wrote:
 

I'd probably just trade the car in. I could get an extra $1500. if I sell it myself. The thing is... how long would that take? And, if I keep the car to sell it myself, would the bank give me a loan for a second car?  I could take a day and shop the car to a few differnet dealers to see what they offer. Maybe it would be higher than what the dealer that has the car I'm interested in will offer. That is an option. 

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How long it takes to sell privately varies, but a lender will probably not allow for a second car loan unless your DTI allows for it.

You're best bet is to shop with different dealers as you stated.   If you're close to CarMax, try them first.  They generally offer better "trade-in" compensation and you're not obligated to buy from them.

[masscredit]

I'll put them at the top of my list. A few people have suggested CarMax to me. I've heard of them but never really looked into them.

[StartingOver10]

CarMax will buy your current vehicle so you don't have to roll the neg equity into the new car. I have sold a couple of vehicles to CARMAX but never purchased there because their prices are too high IMO.

The problem is this:

1) if you are only $3k upside down then bring the $3k with you so the sale can be completed with CarMax.

2) Naturally CarMax will not pay what you can get if you sell it privately so it may not pay you to sell your vehicle to CarMax

3) If you decide to buy a vehicle there, don't buy a vehicle through CarMax with their financing, use your own CU. I say this because the lenders CarMax uses are ones just like your current lender.

IMO the vehicle prices on the sales side of CARMAX are high. Know your numbers before you shop with them or any other dealer.

[masscredit]

I have a vehicle that I'm interested in at a different dealer. Trying to maximize what I can get for the car without doing the private party sale thing. I'd be happy getting a number between trade in value and private party.  The loan would be through my bank (DCU). Great rates and service there! 

[Creditaddict]

go get carmax to give you a buy offer on your car.

go over to the dealership where the new car is and figure out the purchase price and then once you have decided on the purchase price ask them to match car max on the trade in... they can't move numbers if you have already decided on the purchase price without the trade.

make sure you have the pre-approval for the new loan with DCU before all this though.

just ask for them to give pre-approval for the new car at book value and then hopefully you actually need less but if already approved won't be an issue.

[masscredit]

I think I'm going to take my car out of the equasion so it won't be another way for the dealer to make money off of me and I won't have to rush to sell it.  I can carry two loans so I'll just work on buying the one that I want with no trade then after the deal is done, I'll get it cleaned up and sell it on my own. I can get more money for it that way. Might even have it sold before the first payment is due for the new car.