Making a good financial decision after making a bad one... advice needed

[jrkliny]

I have almost always bought new cars. There are some advantages in addition to enjoying something new. I always took care of the oil and fluid changes. I drove with reasonable care. My cars lasted a long time with minimal repairs and maintenance. I was able to get more than 10 years and about 300k miles out of each car.

I have not been all that lucky with used cars. Now that I am retired I can afford the nuisance and time needed for repairs but even so the costs have been considerable.

[ncole1]

Originally Posted by ecsdude

Thanks all for your replies. I should add that the reason I am asking this question and considering ridding myself of the monthly payments is that currently my commute to work and back is 40 minutes each way. So I wanted to have a reliable car vs buying an $8k Honda Fit or the like. But I may soon be moving closer to work (like within 2 miles) and am also looking to buy a house closer to work and want to increase my buying power. One way I could think of to do this is to sell off the car I just bought less than 2 years ago (and am making $336/mo payments on), and get an $8K Honda Fit. I figure the $336 could be used to get into a nicer house (or get me into range to buy a good property near work), and since my commute would be so short, it wouldn't be as critical to go with a newer car for commute.

But like you said, and I kind of felt the same after thinking about it.. I only have $13k left on the car loan, and if I sell it (to CarMax or something) I'd get like $4k cash after the loan is paid off by CarMax. Then I'd still need another $4K cash just to buy the Honda Fit, which would mean I essentially would only be $9K away from paying off the car. And after 5 years of ownership I think I'll still be able to get a good amount for it, while being able to use it for another 3 years. This seems like the better path. or, as some of you have suggested, once paid off, keep driving it another 10 years or so to really get to most out of the dollars spent on it, and allow me to save more money once it's paid off, either to invest and/or to build a fund for my next car (which will be 2-3 years old rather than brand new, to do things the prudent way and avoid making the same mistake of buying new again).

Be careful about borrowing the max banks will lend you. A lot of people get burned this way. If a $336 car payment makes or breaks a mortgage approval you probably shouldn't buy the house, as to do so leaves you with little ability to save for emergencies and retirement, not to mention the eventual next car.

[jtur88]

Every buy and sell transaction is going to cost you, either a margin for a middleman, or a buy/sell price spread. So the best thing to do is to reduce to zero the number of transactions. In other words, keep the car, even after it is paid off, until it deteriorates to the point at which you need to replace it rather than repair it.