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Trade in or Re-fi?


Hello all- NEW here.
Need some advice. I have a 2009 bmw 535 with 36000 miles. Really like the car. Hate the $630/ month payment. I have recently gone through a change in my life (ada divorce) and need to make a decision about my car. I would like oppinions on Re-fi the $13500 that I owe on the car vs trading it in on a new one.
Here are a few things…
have bmw maintenence until December-
just put on new tires
no maintenence issues
gas mileage is 18/ gallon (not good)

I would love the experts to weigh in on this dicision I need to make. :slight_smile:

The best option is to sell the car for hopefully enough to pay it off and lower the bar when it comes to buying another car.

I agree with OK4450. You could easily cut that payment in half and have a brand new car

Agree. You really need to get a car that fits your finances long term. For most all of us, that car is NOT a 535i, as nice as it is. It’s worth maybe $25k trade-in according to Edmunds (rough estimate, could be more or less), I’d ask various dealers to make you an offer for what they’d buy it for (not trade in), someplace like Carmax, then you can go buy an appropriate new car. Better to separate the sale of the old car from the purchase of the new car.

So if you get $25k, pay off the $13.5k, that leaves you $11.5k for a down payment. There are plenty of good new $20k cars out there, you’d then have an $8.5k loan, should be payments of about $250/month or so over 36 months (do NOT finance it for more than 36 months).

How’s that sound?

Trading in they will confuse the #'s so expect a low value to maximize their profit on sale. Its easy to confuse someone in these matters.

I would not finance this car 5 yrs but see if you can handle 4yrs. Today’s interest rates are rock bottom if credit is decent. Look at local credit unions, we got 2.5% on a used vehicle loan. The last nagging issue is lack of warranty on an expensive vehicle. I usually don’t recommend this but you may want to price a BMW backed(not third party) extended warranty to include in refinance if possible.

The 18MPG is likely due to city(stop go) driving which may only change to mid-upper 20’s with most economical cars.

I would car shop and also search your local credit unions for refi. Keeping it is usually the best option all around.

99% of the time, the most cost effective option is to keep what you have and keep making payments. You don’t trade-in or refinance to get out from under a loan unless the interest rate is outrageous. If you have a reasonable interest rate, you just keep making payments on time and learn from the experience.

WOW- Great advice! Raj/ ok4450/ texases… Helpful! I am sure I will figure this out. Just don’t want to let such a great car go… But I would also LOVE some financial freedom!!! :slight_smile:

The '09 BMW will need more repairs as it ages and the BMW maintenance ends in Dec. (8 mos. from now). In addition to the hateful $630 monthly payment you will have to spend more for maintenance and repairs. I’d say the time to unload the car is now. If the $25K trade is value is accurate you can sell the car privately and have about $13K after you pay off the loan. Or, you can see what CarMax will give you for the car.

Dispose of the BMW and then go shopping. You can rent an Enterprise car for a week while you shop. Your next car should not be BMW or anything nearly as expensive. Your financial picture could be very different, living separately and perhaps paying alimony and/or child support. A Honda Civic or Corolla will get you where you need to go. After a few years if you can afford a luxury car you can trade in the “transitional” economy car. You’ll be saving money on gas, insurance, and have a much smaller monthly payment.

@TexasTeacher - you’re in the fortunate position that you have equity in the car that’ll help make getting a new car work out financially. Too often I’ll see the same question from somebody who owes $12k more than the car’s worth. THAT’s a real problem!


Imagine the financial freedom of having no car payment. It will take you a lot longer to get there if you sell or refinance your car.

@Bocephus Moonshine - 9 times out of 10 (or more) I’d agree with you. This time, it’s a very expensive car involved, once that could be a major financial drain in years to come. With a new car in the appropriate price range @TexasTeacher could be set for 10 years, not the case with a used 535i.

Ditto to Texases comment. $630/mo is an awfully big payment, and you need to add to that the elevated cost of owning a 535…especially with gas prices rising. Even if the OP were to take a “hit” on the 535 relative to market value, he could easily bring that payment down to 1/2 by trading for, say, a Camry, and his cost of ownership (not counting the payment) would also drop dramatically.

If he’s getting a divorce and worried about his cash flow, IMHO he definitely needs to change cars.

I suggest you consider selling the BMW and then buy a compact or subcompact car to replace it. You can spend well under $20,000 for these cars. If you want advice on these cars, let us know.

I would not refinance the car. I’d guess that you have a little less than 2 years remaining on the loan. You could refinance at half the monthly payment, but the interest rate will be higher because it is a used car now. And you would have a car bill for 4 years instead of less than 2.

@all, the problem is we are missing part of the picture. I agree $630 a month is a big payment, but how many payments are left? If the interest rate is low, most of the each payment will go to the principal.

Selling a car because of fuel economy is an even worse idea than selling it because of the amount of money owed.

Does the OP owe more than the car is worth? You have to factor that loss, and the loss of new or used car premium that will be immediately lost in depreciation as soon as the OP takes ownership.

I’m sorry, but I don’t see how selling this car can possibly pay off until the car is paid for or the OP can get more than he/she owes, whichever comes first.

He said he owes $13,500, I assume on the principle. That should equate out to about 3 years of payments or more, although I admit to not having nrun a regression analysis with an assumed interest rate. According to Kelly Bluebook the 2009 535 in good condition is worth over $28,000.

I can see how it would pay off.

If the OP can get that much for the car, I will be happy to admit I am wrong.

Not much to add. You’ll just have to run the numbers on the alternatives but don’t be surprised if the best option is to struggle with what you have. If your loan is computed on the rule of 78’s, all you have been paying so far is interest so you will not gain much. I found this out in 1981 back when interest rates were in the stratosphere. I needed a new car and had to settle for the best rates around at the bank for 18%. Two years later the rates were back to normal. I went in to refi it at half the rate, but the monthly difference was very little. I just kept the original loan and it was the last car loan I ever got from the bank.

Of course sell the car. Then buy your next car for cash. With some left over. Presto change-o, no more collision insurance.

He’s unliekly to get that much, Bo, but that doesn;t change my thinking. He has enough equity in the car to clear the outstanding debt on a trade and have a decent downpayment on a new, much more affordable, car. Enough to drop his monthly payments to less than half what he’s currently paying and if he chooses well drop his cost of ownership substantially too. Doubling his gas mileage, an easy chore when starting at 18mpg, would make a big difference all by itself.

Everything drops by half.
his gas costs
his car payment
his cost of ownership
and he goes from a car with 36,000 miles to a brand new car.

I can’t find a downside.

One big issue with refinancing, other than starting the interest rolling again, is that if the OP goes from several years remaining on the note to a 5 year note this adds even more time to the vehicle life in which something can go wrong. This would mean out of warranty, on the car owner’s dime, and likely not a cheap repair if it’s an engine or transmission problem.

The thought of trading it off would be distasteful to me because of what could be a sizeable equity in the car as it sits right now. With the mumbo-jumbo world of sales numbers it would be pretty easy to lose a lot of equity during the BS… uh, sales transaction. :slight_smile: