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Established Member
Posts: 39
Registered: ‎04-15-2009
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To save or not to save?

Ok so for starters, I am not in a critical situation here, I'm just becoming more financially savvy in my older age and plain ole dont like the idea of wasting money anymore. That being said, here's the situation:

 

I bought a car for 40k a couple of years ago. I currently owe 30k, and the car is worth 27k private party at best. So I'm a little upside down. My monthly payment is $520. I'm not really fond of this anymore, and feel I would rather have less car and more money. The question is, am I really saving that much? 

 

I am interested in purchasing a used car for 15k, or apporixmately half of what I owe. However to roll the negative equity into this purchase would of course keep me upside-down. My montly payment is projected to drop to $350 if I do this. Not too shappy, $170/month savings aint bad, plus there will also be fuel/insurance/maintenance savings with such a cheaper car. I'm still upside-down, but at least my payments are more manageable.

 

The real question here is, WOULD YOU DO THIS???

 

I am still in love with my current car. It's a fully loaded Mustang with all the bells and whistles, and just plain ole fun to drive. Even my wife doesnt want me to sell it because it's so beautiful. I'll have it paid off in 5 years, and what a helluva car it will be to have with no payment. But I'll also be $10,000 poorer than I could be if I bought an alternative car instead. Of course thats $10,000 spread across 5 years, or $2,000 per year in savings. Thats a fully paid vacation every year no doubt. $10,000 is also my full line of credit completely paid off. It sure would be nice to not only escape from car debt in 5 years, but also escape from credit debt as well. I'd be virtually debt free from 2 sources at the same time! 

 

So I ask again, WOULD YOU DO THIS??? 

 

I know this is an awfully subjective question to ask, and requires oh so many details as to my personal finances and so forth. I mean how the heck are you guys supposed to know if I need the money or not. Some of you may be doctors and the others pizza delivery guys. $10,000 to one person is $1000 to the next. But, just in general, do we like the idea of my "being smart" and dumping the sports car for the Prius (my replacement car of choice lol, talk about a change of pace), or am I perhaps being a bit too frugal here and maybe keeping the dream car and being happy with it after it's paid off might be a better expenditure of my resources?

 

/stuck in a dilemma 

Super Contributor
Posts: 7,132
Registered: ‎02-27-2013
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Re: To save or not to save?

it really depends.

How are your finances like?

Can you spare that extra couple hundred dollars w/o having to sacrificing anything else? Assuming you can, do you love the Mustang enough to pay a couple hundred more per month to keep it? It really depends on how much you love / hate that car.

A Prius will be more financially feasible because of its cost and MPG, but a Prius isn't going to drive like a Mustang. So you kinda have to sort your priorities out and also look at how much of a wiggle room you can afford financially. So you have to decide whether you want to keep that car, or you rather spend the money elsewhere.

 

There're some dealers, and sometimes certain auto manufacturers, that will have promotion going on where they'll pay for your loan in full as long as you buy their car or use that amount of money towards your new car, even when you have negative equity. Ford used to do that. Not sure if they still do or who else is doing it now. You can check it out I suppose.

 

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Member
Posts: 10
Registered: ‎10-20-2011
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Re: To save or not to save?

One thing you didn't mention is the warranty.   How much warranty is left on  your Mustang, and would there be  one for the used car.

 

You also have to remember that you "know what you have" in the mustang as far as how it has been taken care of etc.

 

I always bought new cars,  but after realizing i was getting killed in depreciation, I decided to change.  I bought a 3 year old lexus that was coing off of a lease.  It was still under factory warranty, I paid $28, that was 4 years ago, the car is still worth $18!!!!

 

Try to figure out what the projected resale is for both cars (yours and a used one),,find a car that doesn't depreciate much,  that is your true cost of the vehicle.

 

 

Valued Contributor
Posts: 2,663
Registered: ‎09-26-2011
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Re: To save or not to save?

Boy, you ARE facing a difficult decision...

 

Certainly one of the greatest American built sports cars ever vs. cheap imported paper mache go kart.

 

Hmmm.

 

I'm thinking Ford wins.  :smileytongue:



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Contributor
Posts: 76
Registered: ‎07-30-2011
0

Re: To save or not to save?

[ Edited ]

Is there a third alternative you're not considering, in refinancing the car loan? PSECU, Alliant, and several others have sub 2% car loans for those with good credit. Unsure what your rate is presently, but on 30k a 1% drop would be about 300 a year in savings. You'd get to keep the car you and your wife enjoy, save some financially, and pay it of in the same or quicker timeframe. The savings wouldn't be as dramatic, though.

 

You can save money all you want, but if your income is stable and you're financially sound, you can also afford to have some fun in your life. 

 

edit: I realize I didn't answer your question. If i enjoyed the car, already had it, and could reasonably afford it.Yes, I'd keep it over getting a cheaper car.

Moderator Emeritus
Posts: 7,225
Registered: ‎09-16-2011
0

Re: To save or not to save?

[ Edited ]

MostlyCloudy wrote:

Ok so for starters, I am not in a critical situation here, I'm just becoming more financially savvy in my older age and plain ole dont like the idea of wasting money anymore. That being said, here's the situation:

 

I bought a car for 40k a couple of years ago. I currently owe 30k, and the car is worth 27k private party at best. So I'm a little upside down. My monthly payment is $520. I'm not really fond of this anymore, and feel I would rather have less car and more money. The question is, am I really saving that much? 

 

I am interested in purchasing a used car for 15k, or apporixmately half of what I owe. However to roll the negative equity into this purchase would of course keep me upside-down. My montly payment is projected to drop to $350 if I do this. Not too shappy, $170/month savings aint bad, plus there will also be fuel/insurance/maintenance savings with such a cheaper car. I'm still upside-down, but at least my payments are more manageable.

 

The real question here is, WOULD YOU DO THIS???

 

I am still in love with my current car. It's a fully loaded Mustang with all the bells and whistles, and just plain ole fun to drive. Even my wife doesnt want me to sell it because it's so beautiful. I'll have it paid off in 5 years, and what a helluva car it will be to have with no payment. But I'll also be $10,000 poorer than I could be if I bought an alternative car instead. Of course thats $10,000 spread across 5 years, or $2,000 per year in savings. Thats a fully paid vacation every year no doubt. $10,000 is also my full line of credit completely paid off. It sure would be nice to not only escape from car debt in 5 years, but also escape from credit debt as well. I'd be virtually debt free from 2 sources at the same time! 

 

So I ask again, WOULD YOU DO THIS??? 

 

I know this is an awfully subjective question to ask, and requires oh so many details as to my personal finances and so forth. I mean how the heck are you guys supposed to know if I need the money or not. Some of you may be doctors and the others pizza delivery guys. $10,000 to one person is $1000 to the next. But, just in general, do we like the idea of my "being smart" and dumping the sports car for the Prius (my replacement car of choice lol, talk about a change of pace), or am I perhaps being a bit too frugal here and maybe keeping the dream car and being happy with it after it's paid off might be a better expenditure of my resources?

 

/stuck in a dilemma 


In this scenario, I agree with what I highlighted in red.  I would keep your current car, and commit to loving it longer and keeping it in the family for years after its paid off.  Take it to the mechanic if it gets sick, treat it like you would the family pet or your kid.  Embrace the fact that you love the car in an irrational way.

You'll save more money and be happier in the long run.  Give your current car a name, cause it will be around a while

 

IMHO I would not trade a car like your mustang in on a "throwaway" cheaper car. If you love the mustang, you probably won't be happy in a Prius, even though its the "green" thing to do and green is "in" right now.

The math will work out if you keep the car longer. 

You could even refi at this point and start saving the difference in payment.

 

At some point I will buy an older mustang (because of love) and do the same thing as what I'm suggesting to you. Probably after the kiddo goes to college.

 

I work with folks who drive 12-15 yr old sports cars such as camaro, mustang, mercedes, etc.  They have saved thousands of dollars by keeping the car longer and taking great care of it.


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Established Member
Posts: 40
Registered: ‎04-29-2013
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Re: To save or not to save?

Without knowing your financial situation, employment, income, other expenses, etc it's impossible for anyone to tell you what to do.

 

If you're living paycheck to paycheck and can't bank any money in savings, by all means, sell it, get something else, even if it means taking a loss.  Out of all of the cars I've owned and currently own, I never thought two of my favorite cars would be a 2004 Pontiac Vibe w/ 166k miles and a 1988 Buick Electra (yes, really) with 88k miles.  The Pontiac gets great fuel economy, averaging 28mpg since we've owned it, about a year now.  34mpg average on a all highway trip from SW PA to St Louis and back.  Super utilitarian, all of the seats fold flat, you can actually haul a washer or dryer in this thing, handles like a go cart, etc etc.  And the Buick..  That was something the fiance brought along when we got together.  Her grandfather bought it new in 87 and gave it to her when he couldn't drive anymore.  The thing rides like a Buick should ride (air ride and all), has great power with the 3.8L in it, still manages decent mileage (18 cty / 26 hwy crusing at 70-75) and has cost me nothing but oil changes and front brakes and rotors in the 3 years I've been maintaining it.  Paid $2500 for the Pontiac, Buick was free.  No car payment is a GREAT thing for us right now.  Oh, and since we have 4 cars and all are owned, I save a bundle on insurance by not having to keep full coverage on them.  That is something else to keep in mind.

 

If you have some disposable income and really love the Mustang, refi and keep it.  As you mentioned, the savings would be a fully paid vacation every year.  Are you going to take that vacation regardless?  Or are you only going to take the family out if you get rid of the 'stang?  Of course, going to another, less expensive car is going to be larger savings than just the car payment alone; fuel is going to be less than the 'stang, especially if you have the GT with the 4.6 or 5.0L (you didn't say what year the car was).  Insurance should be a bunch less, too.

 

If you're seriously considering a Prius, my primary sugession would be to rent one for 2 weeks, put the Mustang in the garage and forget you own it.  I know a few of the national rental chains rent them and Toyota themselves have a rental program with quite a few dealers.  I would go the dealer route first, let them know you're considering buying one and that this is an extended test drive.  You may get a significant discount on the rental that way.  If you can stand driving it for 2 weeks, that helps your decision.  Nothing would be worse than getting rid of a car that you love, buying something else, only to realize you can't stand the car.  I drove a Ford Escape like that.  There was *nothing* I liked about that car!

 

Good luck!


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Posts: 164
Registered: ‎04-16-2013
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Re: To save or not to save?

Judging by the original price of the mustang, I'm guessing you have a GT model?  If you were to make a switch to a Prius, you would save more than just the payment amounts.  GTs are "thirsty" cars, while the Prius is on the extreme end of that spectrum.  Gas isn't cheap these days, and the prospect of 50mpg sure is appealing!  You'd probably save on insurance as well.

 

I disagree with those that would call a Toyota a "cheap throwaway car".  On average they are more reliable and have a longer lifespan than most American cars.  It's all about personal preference.  If I were to go out today and buy a car, having a Mustang or Prius as the available options, I'd for sure buy the Prius.


Moderator Emeritus
Posts: 7,225
Registered: ‎09-16-2011
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Re: To save or not to save?

[ Edited ]

Sorry, I did not mean to offend.  Certainly I didn't mean that the car was to be thrown away... rather, drive it til its wheels fall off.  I think Toyota's in particular are amazing cars to get you from point A to point B.

 

If you consider the cost of each mile driven in a Toyota Prius vs. the Mustang GT, there is no comparison, because you aren't comparing apples to apples.

 

A mustang GT can never be cheaper than a Prius, and for muscle car fans...  a Prius can never be a Mustang GT.

 

A car in particular can be an extension of your identity, and folks will feel more at ease with a car that coordinates and fulfills their personality and their ideals of what a car should be.

 

There are two ways to look at a car, 1) by the dollars and cents 2) as a part of the family and an extension of who you are

 

folks who  have multiple sides to their personality usually have 2 cars,  for example 1 is for their fun side, and 1 is for their practical side.

 

I have 2 cars.... one for the side of me that gets up every morning, dons the steel toe work boots and heads in to do a day's labor

one for the professional and business owner side of me that makes 6 figures and values quality over price.  

2 totally different cars for different purposes. I drive the truck to and from work.  I drive the volvo when I'm going places with my husband and daughter or her friends.

 

Also, keep in mind that some folks may not save money by driving a hybrid... It really depends on if your miles are driven mostly on highways, or mostly in town.   Those with more in town mileage would certainly benefit from a hybrid...

 

Those who do more highway driving, should opt for a non-hybrid car, as the car uses combustion of fuel at higher speeds

 

 

 


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Re: To save or not to save?

If you decide to trade it in, it is very possible to do so.  You are not underwater by that much.  Last May, i traded in a car where I owed about $4000 more than what it was worth for a new Jeep Grand Cherokee and financed it on top of the cost of the Jeep.  If you do this kind of trade in and are financing a little more, make sure you get GAP coverage.  If your car gets totalled before the loan is paid off, this coverage covers the different between what is left on the loan after being totalled and what is paid for that totalled car.  It will allow you to walk away from it without owing anything.  

 

I bought my Jeep last May.  Someone hit me in the side and back of my Jeep in August.  They were considering totaling it.  If they had, my GAP coverage would have taken care of what would not have been paid out for the totalled vehicle.  It ended up being fixed, but now my car is worth $7000-$8000 less after being fixed, so I am underwater by A LOT. 

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