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Established Contributor
jcstarkey8826
Posts: 704
Registered: ‎06-01-2012
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what would you do?

I bought my car 3 years ago. I have 2 years left on my auto loan. I purchased the car for 13,250, and im sure my interest rate is around 12% or so. Well, I dont understand much about auto loans, but what I know is that it makes no sense for me to refinance my car because Id end up paying more than what I owe now, even at a lower interest rate.

 

I owe pretty much exactly what its worth, it seems as though the first few years of my loan was going towards interest, now when i check my payoff every month it seems as if all of it is going towards the balance now. So now if I get a new car or look to do anything I basically just paid all of that money to rent the car. The car just hit 100k miles this week, and Im getting nervous about repairs that will start coming into play.

 

When would be the smart time to start looking for a new car? I want something to report to my CR (as my current loan doesnt report to anything) and I want something with better MPG and under warranty to not stress about repairs, but it seems as though Im just now starting to knock off some of the balance and dont want to lose that. The logical thing seems to keep it until its close to paid for, but would the end of this year be a dumb move?

 

What would you do?

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Shogun
Posts: 12,952
Registered: ‎04-15-2011
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Re: what would you do?

Kind of a YMMV type of thing.  You say that your vehicle is approaching 100K miles.  Is it having problems now?  Mine is at 150K and still going strong.  "Knock on Wood".  The MPG issue would be a definite positive.  But would the cost of the new vehicle offset this?


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ds3
Posts: 76
Registered: ‎10-02-2012
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Re: what would you do?

I would keep it as long as it's running well. I typically keep cars for at least 2 years after they are paid off, or until they cost me more in repairs than a new car payment. Paying it off will also build a solid TL on your credit, and give you some equity to use as a downpayment on a new one. Trading cars in before they are paid off is rarely a good idea, as it often leads to negative equity in the new one.

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jcstarkey8826
Posts: 704
Registered: ‎06-01-2012
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Re: what would you do?

its not even reporting to my credit at all. so it has no impact there. The gas would save me about $50/month. and my car payment would actually decrease monthly, but I will be paying for it long after 2 years. My car isnt have major mechanical issues, just the tedious stuff. Window motors, lighting issues, a/c compressor, battery, belts, shocks, struts etc. have all been done in the past year. It felt as if every month I was paying my car payment and repairs. I get so frustrated sometimes, but now that I see my balance dropping on my current loan I dont want to get anything new. catch 22 lol but maybe when I have some equity in it i can meet myself in the middle. Not have it paid for completely, but have a decent amount of equity??

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Revelate
Posts: 9,044
Registered: ‎12-30-2011
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Re: what would you do?

It's your call as to when to replace it; however, if you are planning to keep this car for a bit (and you don't have a mortgage coming up in the short-term future) I'd take a look at refinancing it so you can get the tradeline on your reports.  Admittedly I'd talk to your current provider first and see if they will report it, but with CU's basically throwing money at people to take car loans, it's worth looking into.

 

I may be in the minority on this one, but from my perspective I want any possible positive tradeline I can get on my reports; this is doubly true with an auto loan which is a nice installment line to have.  Also I'd point out that if you don't have an auto loan on your reports currently, doing this for when you finance a future car, may actually help quite a bit in terms of what interest rate you receive out the gate (auto-enhanced score bonus!).

 

 

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tooleman694
Posts: 2,297
Registered: ‎08-25-2011
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Re: what would you do?

I lease my cars, drive it for the first 30k miles dump it and get something new.

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jcstarkey8826
Posts: 704
Registered: ‎06-01-2012
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Re: what would you do?


tooleman694 wrote:

I lease my cars, drive it for the first 30k miles dump it and get something new.


I've been hearing a lot of people talking about leases. I haven't looked into how they work and what the pros/cons are, but if I could drive a new car every two years and not have to worry about repairs, it might be worth looking into haha. I'll have to check out some pros and cons, but that might be a very real option.

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tooleman694
Posts: 2,297
Registered: ‎08-25-2011
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Re: what would you do?

The 2 big cons are, you are gonna have car payments forever and if you go over the miles they allow your gonna pay for those miles at the end of the lease.

 

But you can get a nicer car for much cheaper and never have to worry about fixing it.

Established Contributor
jcstarkey8826
Posts: 704
Registered: ‎06-01-2012
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Re: what would you do?


tooleman694 wrote:

The 2 big cons are, you are gonna have car payments forever and if you go over the miles they allow your gonna pay for those miles at the end of the lease.

 

But you can get a nicer car for much cheaper and never have to worry about fixing it.


I drive around 1000 miles per month, and my biggest fear is going to turn in a lease and having to pay all kinds of money, but that might seriously just be the best option and ill have my fiances car to use if we need to make long trips. Thanks for the advice!

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HoldingOntoHope
Posts: 1,057
Registered: ‎09-29-2009
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Re: what would you do?

With most leases you can buy additional miles up front if you know for sure that you will exceed the standard lease allowance miles. Purchasing the miles up front is a significant savings from paying out at the end. But I don't believe there is any refund or rollover if you don't use the additional miles. So you need to have a solid idea of what you will use and a backup plan if you are still going to go over.

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