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I have a 2014 Toyota Corolla with $17,500 left on the loan. I bought it new about two years ago. I have probably $2000-2500 in negative equity in it. The monthly payment is $390 and I have 4 years left on the loan. It would be nice to cut my payment in half so I have some extra spending money.
I could pay $2500 on my current loan, then sell the car privately. I could turn around and buy a 2010 or 2011 Honda or Toyota with low mileage and get a 3yr loan for around $9000 after I put $1000 down. It should make my monthly payment around $250.
Does this sound like a wise financial plan or should I just keep my current vehicle?
In your shoes I would keep my car and make extra payments and try to pay it off sooner. Just looking at Kelly Blue Book and guessing at some car specs and interest rates for new vs. used, it looks like you really won't be all that much ahead for all your troubles and you won't have a car with a warranty anymore.
And even with your numbers you still aren't meeting your goal of cutting your car loan in half.
I have a 2014 Toyota Corolla with $17,500 left on the loan. I bought it new about two years ago. I have probably $2000-2500 in negative equity in it. The monthly payment is $390 and I have 4 years left on the loan. It would be nice to cut my payment in half so I have some extra spending money.
I could pay $2500 on my current loan, then sell the car privately. I could turn around and buy a 2010 or 2011 Honda or Toyota with low mileage and get a 3yr loan for around $9000 after I put $1000 down. It should make my monthly payment around $250.
Does this sound like a wise financial plan or should I just keep my current vehicle?
Doesn't make much sense to sell the car at this point, as I think you'll have only slow depreciation going forward.
Here's another question. I HATE having a car payment! It's nice having a newer car, but it sucks having to pay every month.
Would it be a wise idea to make a large $3000 payment on my current vehicle to get rid of the negative equity, sell it, then buy a Honda or Toyota that's 10 years old for around the $5000-6000 mark? I can pay cash for the vehicle. It would be nice to have the extra $390 a month to put towards savings.
I suppose I could also put $3000 + $5000-6000 (which would be spent on a 10yr old vehicle) on my current vehicle. That would lower the loan by a lot, but still leave me with a car payment. At least the car would be only a few years old.
Here's another question. I HATE having a car payment! It's nice having a newer car, but it sucks having to pay every month.
Would it be a wise idea to make a large $3000 payment on my current vehicle to get rid of the negative equity, sell it, then buy a Honda or Toyota that's 10 years old for around the $5000-6000 mark? I can pay cash for the vehicle. It would be nice to have the extra $390 a month to put towards savings.
I suppose I could also put $3000 + $5000-6000 (which would be spent on a 10yr old vehicle) on my current vehicle. That would lower the loan by a lot, but still leave me with a car payment. At least the car would be only a few years old.
You have a trouble-free 2 year old car that is one of the top-10 for reliability. A 10 year old car is going to have age-related failures that will cost you money, particularly if you live anywhere with road salt. If you have DIY mechanic skills, a 10 year old car is fine. If you're paying $75/hour+ shop charges for all the little annoying things that fail on a 10 year old car, you should stick to the newer model.
Accelerating payments kind of depends on the interest rate you're paying. The higher the rate, the more incentive you have to pay off the loan. If you have credit card debt with 18% interest, you obviously want to pay that off first since you always want to pay off the highest interest rate debt first. If you have some 0% promotional rate car loan, you'd have way less incentive to zero out the loan than if you had a 10%+ sub-prime loan.
You have a trouble-free 2 year old car that is one of the top-10 for reliability. A 10 year old car is going to have age-related failures that will cost you money, particularly if you live anywhere with road salt.
This. I'd buckle down, pay off the loan as quickly as possible, even if I had to take a second job to do so, then drive it for the next 10-15years. In that time, also save up so that you can pay cash for the next vehicle, rinse, and repeat. I am with the OP in that I HATE HATE HATE car payments. That's why I paid my 09 Accord off a couple years early, and have been saving ever since so the next car I buy is in cash.
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