Pay off then trade or just use the cash as a down payment?

[Anonymous]

I am upside down in a fast depreciating 2017 Jeep Renegade, to the point it is depreciating faster than I am paying it off. Purely because of a ridiculously high interest rate. I was roughly even in oct. but I am now upside down by about $1000. It is in perfect condition with only 8400 miles.

So I am thinking of getting out before it gets any worse and since my fico is about 100 pts higher,  I can now buy something that won’t depreciate as fast(Chevy Silverado 1500) and will also eliminate the sky high interest rate. The bonus is this is what I wanted all along but after buying a used lemon a month before the I bought the renegade I was stuck getting something I could get financed for instead of what I actually wanted.

So my question is should I pay off the Renegade then trade it or use that cash as a down payment instead and eat the negative equity?

[ridgebackpilot]

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@Anonymous wrote:

I am upside down in a fast depreciating 2017 Jeep Renegade, to the point it is depreciating faster than I am paying it off. Purely because of a ridiculously high interest rate. I was roughly even in oct. but I am now upside down by about $1000. It is in perfect condition with only 8400 miles.

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Well, one option you should consider is simply refinancing your loan on the Renegade. You could cut your interest rate and/or lower your monthly payment significantly. Wait to trade the Renegade in until you've paid it off, or at least down enough that you're no longer underwater.

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@Anonymous wrote:

So my question is should I pay off the Renegade then trade it or use that cash as a down payment instead and eat the negative equity?

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Either way, at this point in time you're going to eat the negative equity if you trade in the Renegade. So it doesn't really matter which of these options you choose. In either case, you're going to be out negative equity.

Now that your scores have improved, a better option is not to sign a loan that will put you underwater. Or if you do, calculate the estimated depreciation and compare it to your loan amortization table. You can see at what point you'll cross over into positive equity in the vehicle. If that will take more than two years, buy a GAP insurance policy for peace of mind.

Finally, if you're going to buy a car and trade it back in after only two or three years (or less), you might be better off leasing...

[Anonymous]

,@ridgebackpilot

At 18% with Chrysler Credit I don’t think I could every pay it down past it’s depreciated value. Why 18%? They had me over a barrel and knew it. I bought a 2011 Ford F-150 I had it 1000 miles and the dealer had to do $6000 in to repairs and it still wasn’t right. It was supposed to be a 50/50 warranty but they paid 100% until we all agreed the truck was a junker. 

I had put $4000 down and didn’t have any more cash when the decision was made they would take the truck back and put me into something else. With a 584 fico and no more money down, them using every incentive possible and a junk truck I was out of options and had to take what I could get. Basically I didn’t have much choice but to give them the golden ticket to screw me.

I dont buy and trade every 2-3 years normally, I usually keep them 7-10. This was an emergency buy. But at my usual 7-10 years the Renegade that I paid $33,000 for that would be worth about $500. If I trade it now my thinking is 7-10 years from now I will have a truck that I am going to pay $38000 for that I will still have $10-12k or more in trade in value as opposed to nothing if I keep the Renegade.

[ridgebackpilot]

Sorry to hear about your bad experience with the Ford truck. Too bad you had to settle for the Renegade. At this point, it sounds as if your main problem is a really bad loan. You need to do whatever you can to get rid of that really high APR.

But that doesn't mean you need a new truck! Why not refinance the Jeep, which will allow you to cut your losses significantly? With your scores, your local credit union can probably get you a much better loan than 18% APR. Your monthly payments would go way down and after a few years you wouldn't necessarily be underwater in the Renegade.

Bottom line: Don't assume that your only way out of a bad situation is to buy another truck!

[Anonymous]

+1 on the refinance.  Look up the NADA retail value.

Credit unions will refinance up to 120% NADA retail value.

Saving 10% or more on the interest rate will make a huge difference on your payment and how quickly you can pay it off.

Best bet is if refinancing pay same payment as today but get it paid off quicker.  Playing with numbers guessing what yours were you could potentially refinance, make same payment and still pay it off more than a year early.  Of course I don't know how much you financed and how many years just playing with numbers.

Given that even if you have to cough up $1,000 or $2,000 to get your LTV below 120% it's worth it if at all possible.

Car is pretty new it wouldn't be sound financially to trade for a new one unless that was the only way to get out of a bad loan.  If you were so upside down but got a great deal on a new car lets say $8,000 off sticker on a $40K Sticker car then you might just be able to roll the negative equity into the new loan and finance 100%.  Yes still started off with negative equity again in new car but if you are going to lets say pay $500 @18% for a car you consider OK versus $500 @ 5% for a car you love...   

If rolling negative equity into a new car you really must get GAP insurance.

[Anonymous]

Getting out of the bad loan is easy, I have the cash to pay it off. But If I used the cash to pay it off then trade it or as a down payment I wouldn’t be underwater. I would actually be financing less than I paid for the Renegade obviously at a MUCH better rate and would have approx $11,000 in equity after the first year.

So this may be a stupid question but shouldn’t the trade in the value for the same time period shouldn’t be a factor? 

Renegade $23,000

10 yr trade in value $500 - $1000

Negative Equity @ 1 yr 

Silverado $38,000 - $16,000 trade in or cash = $22,000

10 yr trade in value $15,000 - $17,000

equity @ 1 yr $12,000

To me this seems like a no brainer, I just don’t which to do pay off and trade or use it as a down payment. obviously I am biased by a bad taste in my mouth about the Renegade loan and having to drive a car that I know is depreciating faster than a Jet plummeting to earth...lol

[Anonymous]

@njcobra10tha

$12,000 off sticker if I buy a 2018, $7000 off a 2019. I met with a dealer yesterday and these are the deals they worked up, I put the stopper on it when they wouldn’t budge on my trade in value and left me w/ $1000 in neg equity. So these numbers are what I was asking for and they agreed to everything but the trade in value. 

2018 Chevy Silverado(New)

$47,000 sticker

$35,515 after incentives

$16,196 cash down or trade

2019 Chevy Silverado 

$45,414 sticker

$37,415 after incentives

$16,196 cash down or trade

BTW I HATE the Renegade, it is a complete POS.

[Anonymous]

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@Anonymous wrote:

@njcobra10tha

$12,000 off sticker if I buy a 2018, $7000 off a 2019. I met with a dealer yesterday and these are the deals they worked up, I put the stopper on it when they wouldn’t budge on my trade in value and left me w/ $1000 in neg equity. So these numbers are what I was asking for and they agreed to everything but the trade in value. 

2018 Chevy Silverado(New)

$47,000 sticker

$35,515 after incentives

$16,196 cash down or trade

2019 Chevy Silverado 

$45,414 sticker

$37,415 after incentives

$16,196 cash down or trade

BTW I HATE the Renegade, it is a complete POS.

Just curious what do you hate about it. I was thinking of buying a leftover 2018 one; my back is not liking my Corolla too much and the Renegade would be easier to get in and out of. 

Thanks.  

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[ridgebackpilot]

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@Anonymous wrote:

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@Anonymous wrote:

BTW I HATE the Renegade, it is a complete POS.

Just curious what do you hate about it. I was thinking of buying a leftover 2018 one; my back is not liking my Corolla too much and the Renegade would be easier to get in and out of. 

Thanks.  

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Check the Consumer Reports road test of the Renegade. You won't be inclined to buy one if you read that report first!

OP had a bad experience with an older Ford truck, but Consumer Reports rates the new Ford F150 a far better buy than the Chevy Silverado.

[Anonymous]

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@ridgebackpilot wrote:

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@Anonymous wrote:

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@Anonymous wrote:

BTW I HATE the Renegade, it is a complete POS.

Just curious what do you hate about it. I was thinking of buying a leftover 2018 one; my back is not liking my Corolla too much and the Renegade would be easier to get in and out of. 

Thanks.  

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Check the Consumer Reports road test of the Renegade. You won't be inclined to buy one if you read that report first!

OP had a bad experience with an older Ford truck, but Consumer Reports rates the new Ford F150 a far better buy than the Chevy Silverado.

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Consumer reports hates my Dodge Journey and loves my Corolla.  Outside of reliability data I don't put much stock in their analysis anymore. I find owner opinions to be more valuable.