Blackbook tradein is only $25000, and you would be lucky to get it as this is not a very popular vehicle. That means you would add $5000 plus to the cost of a new vehicle which will depreciate rapidly as the miles roll up.
The only way out is to pay this off as quickly as possible and mainain it very well. Positive points:A): This a a Toyota and should be reliable. B) Highway miles are easy on a vehicle. Aren’t Toyota RAV 4 Hybrids used as cabs until they have really high mileage? Cab service is much harder on a vehicle than highway driving.
Car was purchased as a 2016 model year (maybe right after college), financed for 7 years (Yes 84 months) with very little down payment. Bought a hybrid to hopefully save on gas. The commute plus other use is 2300 miles a month, hence the 41,000 miles on the car.
The OP is living where they can afford (or at the family home) since near work is 2 to 3 times the rent they pay now. Say, working in NYC and living in New Jersey or Working in Boston and living as far inland as they can.
Not agreeing that any of this is a good thing, just assessing the situation.
Oh, yes! A Porsche 959 that was never “Federalized” to meet US emissions or safety that can now be imported under the 25 year rule. Gate’s car was the stuff of legends!
There aren’t a whole lot of 6±year loan scenario that wouldn’t have you upside down for the majority of the loan.
And to an extent, that might be OK, as long as you get gap insurance so you aren’t left holding the bag when the uninsured drunk plows into you, and as long as you keep the car at least to the end of the loan period.
But trading in one upside down loan for a loan that’s more upside down is, frankly, insane.
If I remember right, and it’s foggy because it’s been so long, but the 959 was never crash tested to US standards, and in order to import it, Gates would have had to have one crash tested – which would probably have gotten him shot by car enthusiasts.
Oh My, YES! There were only about 200 of the cars built at all so sacrificing even one would have been a major deal. And it likely would not have passed. I heard one rumor that Gate’s 959 was in a container in Seattle and another rumor said it was in Vancouver.
During that time I saw an actual one with a dealer license plate on it at Mid-Ohio racetrack! I wondered how it manged to get in.
I think they are worried about the trade value I’m more concerned about keeping my credit good and having a reliable vehicle which I have right now and should have for quite a while as long as I take care of it.
Unfortunately there is nothing closer I have looked. It would cost more to move our house is paid for and we are in an area where the property tax is low.
I do believe they thought because of the miles it would be better. I am going to stick to my guns keep this vehicle and try to pay it off sooner as many have already suggested and then try to save money up so I don’t have to have such a large loan next time. I honestly feel I many years I can get out of this vehicle still as long as I take good care of it and that is the plan I am going to stick to.
You are exactly right, and they are exactly wrong. Depreciation is unavoidable, and you pay the most on a brand new car. So their idea hurts, rather than helps. Good for you for asking the right questions and making the right decision! Keep it, maintain it, pay it off as soon as you comfortably can, the keep putting those payments into a ‘new car savings account’.
That is a good plan in my opinion. It could require a little (or much) sacrifice, but that makes one more financially savvy, anyhow.
“I am going to stick to my guns keep this vehicle and try to pay it off sooner…”
I recommend figuring out your payment and what extra you can possibly save and then set a rather strict budget. See if it can be done so that the “try to” becomes “will.” Most businesses, I believe, have a way to set up voluntary savings account withholdings from paychecks to make it happen, if needed.
I budget for nearly every recurring expense and it works well for me.
If you have more equity each time you trade a car and the loan is smaller you’ll be saving more (and hopefully earning more by then) and who knows? Perhaps one day you’ll walk in and pay cash.
Good luck! CSA
P.S. Is there any way to car pool, even for a part of the commute? I’ve done that before.
One trick to paying off early. If you get paid every two weeks, make a payment every other payday. That will be 13 payments per year. Shorten your payoff by 5-6 months.
To make a double payment as one suggested, is a lot of money and may not be practical. Another gimmick is find out how much of each payment is for interest and how much pays down the loan balance AFTER YOU FIND OUT IF THERE IS A PENALTY FOR PAYING IN ADVANCE.
If no penalty, each payment add the equal of the part that pays down the loan. It gets paid off really fast that way, without a lot of stress.
This also works really well on a 30 year house loan. The first month’s payment pays only a few dollars towards the loan balance. But, if you get a payment chart, and add the amount, that few dollars that goes for the balance, you will find your house paid for much much sooner than you would think. It takes very little extra money up front to make that 30 year loan into a 25 year loan.
With the shorter loan on a vehicle the advantage is much less.
If you can’t get a chart breaking it down, get a financial calculator and use that to figure it out.
Just adding $50 to your payment each month, towards principal, will significantly shorten the loan. In the future I would stay away from 6 or 7 year loans. If you know that you drive a lot of miles then a four or five year loan is more sensible. I drive 35,000 miles a year and always take four or five year loans at zero percent (or similar). My cars always last easily to the end of the loan and then I have a beautiful, well maintained vehicle to pass down to one of my kids, if I choose to upgrade.
On some loans, it doesn’t save money to pay off early. The OP has to check the loan papers to see if the interest is computed at each payment or at the beginning of the loan. Home loans are computed at each payment, but the last auto loan I had computed interest at the beginning of the loan, and paying off early didn’t change the amount owed. It has been a few years, though.
A 6yr old rav 4 w/200k miles is worth something. One with 75k miles might be worth 12k. Double the miles and the value drops a couple grand. It’s a Toyota.
Not to be a wet blanket but the reality is $50 a month extra for five years only knocks the principal down $3000 out of $29,000. Better than nothing but that’s not going to solve the problem. You just have to knuckle under for a while to dig out. A lot of us have been there so nothing new.
I commuted 100 miles a day and needed a car during the crazy times in 1981. My 81 Olds diesel cost me $10,000 and the best bank rate was 18%, gulp. ( I laughed at my CPA BIL when he got a loan for 17% 6 months before.) So in two years the rates were lower and went to see the bank but was informed it wouldn’t do much good because I had been paying mostly interest for two years and now was mainly principal (thanks to rule of 78ths). Also looked at getting rid of the thing but I had 70,000 on a diesel and the best the dealer would give me was $2400 in trade. So at any rate I just got mad and kept the car for 15 years on the road and put 480,000 miles on it. Outside of repairs and interest, I was down to about 2 cents per mile for the car itself. That was the last bank loan I ever did. Credit unions and even manufacturer financing are your friends. In 86 my Buick cost about twice as much but GMAC was down to 7% so payments were about the same.
So at any rate, you just stick with it and even a coffee cup will eventually bail a boat out.
