Decisions decisions

[Anonymous]

Okay so here's the deal: I am in the process of shopping for a new vehicle. I opened a 72 month term car loan with GM Financial last year in January $15000 - 330/month. I'll let you calculate the interest rate..yes I now know I got the stiff. I have since been rebuilding my credit scores to make my life easier in the long run. 

Currently, I owe $11,900 on the 2011 Regal and it's pushing in upwards of 100K miles. (I got it when it had about 66K) I have not had any major issues with the car, but I know that eventually we're going to get into the "let's replace everything" phase - hence the shopping for a newer vehicle. Doing a KBB valuation, it's going to be worth roughly $7 - 8K on a dealer trade-in..

I've been doing some light reading online and found I could

• Keep the vehicle and refinance for now a lower apr/shorter term
  • More maintenance
  • five year old car 
  • no more new car smell 
• Keep the vehicle
  • continue paying the contracted monthly amount
  • understand/accept that as each month passes I am getting screwed
• Lease another vehicle and let the dealership deal with the old one
  • sounds really good having a newer car
  • no more car after lease-end..uh-oh
  • drive roughly 40mi one way to work daily (shaky on the mileage allotment)
• Trade in the current one and finance another vehicle.
  • Newer car!!  
  • less maintenance/worry
  • roll over the debt/new inquiry on credit report
  • look for incentives on cash back/ negative equity relief

Scores are: 

EQ: 727 Auto 8, 705 Auto 5, 726 Auto 9

TU: 737 Auto 8, 706 Auto 4, 711 Auto 9

EX: 693 Auto 8, 683 Auto 2, 704 Auto 9

My scores are pretty solid, but I have to admit my file's a little thin and mostly my accounts are student loans. I've got a couple of credit cards: two under 500, and an Amex with 7K limits. I've got one missed payment on an auto loan in Sept 2012... Annual income of $40K. I want to get a newer car (2013-2015).. not brand spanking new, not really interested in taking a hit on depreciation...Am I missing any pros or cons in terms of the options I've listed? Have I missed an alternative?

I'm still debating on a vehicle, because I have realized this should be considered as a serious investment and not jumping at the first offer like I did because it was offered and I was desperate with my low scores at the time... which were along the lines of mid 500s. I mean, do I even have a shot with BMW on the Elite tier?

Feedback, expertise, suggestions are welcome and appreciated.

[takeshi74]

---

@Anonymous wrote:

I've got one missed payment on an auto loan in Sept 2012.

---

Hit Rebuilding and see if you can do anything about getting that removed.  Definitely do whatever it takes to avoid lates, collections, etc.

Your low limit cards do reflect concerns with your credit profile at the time(s) the limits were determined.

---

@Anonymous wrote:

I'm still debating on a vehicle, because I have realized this should be considered as a serious investment

---

By context it seems you're referring to investing in the effort, not the vehicle.  If you're investing in vehicles then you're doing it wrong unless they're rare exotics.

Generally speaking, leasing is not a good idea unless you can write it off as a business expense but there are plenty of other resources out there on the pros/cons of leasing versus buying that you can refer to.

Don't overlook the Auto subforum.

[Appleman]

As 75 stated, cars are not investment. They are indeed a depreciating asset, the longer you hold it the less it is worth.

Looking at KKB it looks like you are looking $6,600 dealer trade and $7,400 for selling yourself. Near a Carmax? Go and get their FREE offer to buy. This will give you a good idea about the value of your current car. I am also a fan of CarGurus for seeing what similar cars are being sold for in your area.

That puts you between $4,500 and $5,300 of negative equity you need to either pay off or roll into a new loan.

You are currently at around 17% +/- for your interest rate.

You can certainly stack an argument any way you like. Anything from staying put and paying extra to accelerate the payoff to buying a brand new vehicle and rolling in the negative equity.

It is your money and obviously your decision. If at all possible get your financing lined up before shopping. This will give you a bit more leverage when negotiating. I know the feeling of sitting in the finance office just hoping they will approve you, at that point they are in control.

For some, car buying is an emotional experience and the sales people are counting on that as they 'sell' you their product. Bring along a friend who will act as the 'bad cop' when they are trying the hard sell or when you get too caught up in the process and just have to have that car. 

Let us know how things go for you.