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Upside down... New Vs used

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New Contributor

Upside down... New Vs used

 

Hey Team Fico,

I am currently upside down on my vehicle by 7-10K .I am trying to determine the best course of action. Should I purchase a new vehicle with a relatively low interest rate or a used vehicles with a slightly higher interest rate. In your opinion which is the best option based on my circumstance.  My Experian credit score is 777 and my Transunion is 708. I cannot wait to Hear your opinion, and both are fico scores.My current interest Rate is 19%, and let me know why you chose new vs. used. 
 

 

 

 

New car purchase price 35-40k
Used car purchase price 25-35k


Thank you! 

 

 

 

Message 1 of 12
11 REPLIES 11
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Valued Contributor

Re: Upside down... New Vs used

What is wrong with the current car?

Ch 7 Discharge 3/12/2018
Cap One VentureOne $3,500, CapOne Savor $3,000, Kohls $2,000, BBVA $2,500

Closed CreditOne $800, Blaze MC $3,000, Waufair $5,000

Infiniti Financial lease $9,777 remaining, 19/39 months left
Subaru/Chase $12k 1.99% 35/36 months left

Message 2 of 12
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New Contributor

Re: Upside down... New Vs used

The car is six years old, and the interest rate is 19%.

Message 3 of 12
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Community Leader
Super Contributor

Re: Upside down... New Vs used

It's difficult to recommend because we don't know what rates you would be approved for. Even if you got a good rate, all that negative equity is going to change it 

 

On average, every $10k you add to an auto loan will raise your monthly payment by $200.

 

On top of that, the amount of negative equity you're going to be rolling into the new loan is going to really screw the LTV, which will in turn change your approval odds and what rate you would get.

 

I would either pay down that negative equity or save up enough of a down payment to help offset it during purchase.







Message 4 of 12
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New Contributor

Re: Upside down... New Vs used

@Brian_Earl_Spilner Thank you for responding, and I have a lot to think about. 

Message 5 of 12
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Valued Contributor

Re: Upside down... New Vs used


@RashShakur wrote:

The car is six years old, and the interest rate is 19%.


A big reason you're upside down is you've been paying interest instead of principal, a situation you will endlessly repeat until you make improvement to your credit profile. 

 

Maybe post up in the Rebuilding Forum to see what can be done about that BEFORE looking to buy another car?

Starting Score: (5/24/2018) -- FICO 08 EXP: 643; FICO 08 TU: 642; FICO 08 EQ: 677
Current Score (05/20/2020): FICO 08 EXP: 743; TU: 751; EQ: 759
2020 Goal Score: 760 across the board


Take the myFICO Fitness Challenge
Message 6 of 12
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New Contributor

Re: Upside down... New Vs used

@James_A  Thank you and will do that and explore additional options. 

Message 7 of 12
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Established Member

Re: Upside down... New Vs used

How long have you had the loan for your current vehicle?  
Does the new vehicle you're looking at have a large rebate?

Have you already applied for a new loan and been approved for a rate and amount?

 

Sorry for all the questions, but the answers will help me give advice from my perspective.  

Garden Club Member
Message 8 of 12
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New Contributor

Re: Upside down... New Vs used

@GardenTulip  I have had the loan for 2.5 yem years, and the vehicle is Toyota 4Runner with a 2k rebate. I haven't applied for any loans thus far to gauge the interest rate without rolling the negative equity into the loan. 

Message 9 of 12
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Established Member

Re: Upside down... New Vs used


@RashShakur wrote:

@GardenTulip  I have had the loan for 2.5 yem years, and the vehicle is Toyota 4Runner with a 2k rebate. I haven't applied for any loans thus far to gauge the interest rate without rolling the negative equity into the loan. 


I don't think a vehicle with a 2K rebate will be enough to get your negative equity rolled into the loan.  It could work if you have some money to put down.  
I completely understand wanting to get out of the loan you have now with that rate.  I would either try to find a new vehicle with a larger rebate or refinance your current loan.  Good luck to you. 

Garden Club Member
Message 10 of 12
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