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Many new car loans are 6 or even more years long. You can count on being "under water" since the rate of depreciation will exceed the payments. This should not be a surprise to anyone getting a loan with a long payment. There is nothing unique about this. If you buy furniture or appliances on time you will immediately own much, much more than the goods are worth for resale or insurance purposes.
This is obviously very true and sad especially since the sales people use this to their advantage to profit.
It’s not about the price of the car, they start out by discussing what you want your car payment to be each month! This way they monopolize on their profit and commission.
I don’t play that game anymore, fortunately. I cut them short and ask for their best price since I’ll be paying by check. They really don’t like that at all since I have the ability to get the best possible deal without all of the smoke & mirrors!
A trick I actually use is to let them absolutely screw me with a higher interest rate (they get money for bumping up the interest rate). Then I pay it off by check immediately.
In my experience you can get a little lower price by letting them get ya on the interest rate but then it's moot.
I belong to a Toyota Highlander group on FB. Recently a woman was trading in her 2018 Pilot for a 2019 Highlander. Her loan amount was going to be $70K with payments close to $1100/month for 96 months! I can't even imagine. Combined, my husband's and my car payments (without paying extra on them, to pay them off early) are less than $800 for two 2019 Toyotas. My 4Runner has about 50% equity in it, my husband's Tacoma has more like 10% equity. We pay an extra $100-150 per month on each (mine financed 4 years, his 5). I had no idea people did stuff like that woman did until other people commented on the post saying how much the owed because of negative equity.
Yeah, the auto loan industry is cray. Lots of defaults. Lot of people with huge loans for cars they never should have qualified to finance. I guess it was luck of the draw that I learned early on that cars are not worth having big monthly payments. I bought my first new car right out of college, and while I had a very reasonable payment, it was still annoying for someone just starting at an entry level salary. I drove that car until it had 200k miles and was on it's last legs. I am now on my second car and figure I have another 5-6 six of use left on it. Most of my peers have had 4-5 (or more) different cars in that time.
I belong to a Toyota Highlander group on FB. Recently a woman was trading in her 2018 Pilot for a 2019 Highlander. Her loan amount was going to be $70K with payments close to $1100/month for 96 months! I can't even imagine. Combined, my husband's and my car payments (without paying extra on them, to pay them off early) are less than $800 for two 2019 Toyotas. My 4Runner has about 50% equity in it, my husband's Tacoma has more like 10% equity. We pay an extra $100-150 per month on each (mine financed 4 years, his 5). I had no idea people did stuff like that woman did until other people commented on the post saying how much the owed because of negative equity.
We know a couple who probably pay about $1500/mo on their 3 cars. We know them well enough to know that the cars are financed. The husband seems to see cars as status symbols. There is no doubt they are underwater.
I have a cousin of mine asking me for advice who is upside down on his vehicle.
He owes $19k and Blue Book value is half that.
Car is 4 years old with 100k miles on it and he has terrible credit to boot hence a high interest rate and a large monthly payment.
Any suggestions?
Drive the car until it's paid for. that's the only way to get out of the underwater situation. Hopefully it's not a crappy car.
Quote:
Originally Posted by goldenlove
I belong to a Toyota Highlander group on FB. Recently a woman was trading in her 2018 Pilot for a 2019 Highlander. Her loan amount was going to be $70K with payments close to $1100/month for 96 months! I can't even imagine. Combined, my husband's and my car payments (without paying extra on them, to pay them off early) are less than $800 for two 2019 Toyotas. My 4Runner has about 50% equity in it, my husband's Tacoma has more like 10% equity. We pay an extra $100-150 per month on each (mine financed 4 years, his 5). I had no idea people did stuff like that woman did until other people commented on the post saying how much the owed because of negative equity.
Trading a 2018 for a 2019? That's insane. I tend to buy new, then drive for 10-20 years. I drive a 2010 4Runner that I bought new. I see no reason to get rid of it for something new. My drove a 2004 Volvo for 15 years, and would still be driving it if it hadn't been totaled in an accident.
Drive the car until it's paid for. that's the only way to get out of the underwater situation. Hopefully it's not a crappy car.
You don't need to drive it until it's paid for, but you need to keep it until the break-even point. That's four to five years on most vehicles, assuming you didn't roll in $10,000 worth of negative equity or put 30,000 miles on it per year.
Wife just bought a newer (although not "new") car. The finance manager at the dealership proved to be a real blowhard, as he wasted about 20 minutes of our time trying to upsell the loan -- here, you can buy this 'protection' and that 'protection' and add it into your monthly payment for just ____ dollars. Then when his time was up and we declined everything that was offered, he told us that he wasn't trying to sell us anything. Can't make it up. By the way, her loan was for 4 years, I refused to go out any further.
They tried the same thing with me. But once he realized that I was putting down as much as I was, he said "oh never mind"....something about how they don't do those extra protection deals unless the loan is over a certain amount. Whatever...I told him it wasn't happening so he was wasting his breath.
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