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When to trade


Purchased an '05 Subaru Forrester in '07 had 25k on it now has 60K. Have $9,000 left on loan with 9.74! interest. Runs Good minus a few minor problems. Should I trade in for a NEW forrester for lower apr, No mileage, longer warranty, same monthly payment and avoid future problems and $ with old car? trade in will be about same as remaining loan.

Or should I keep old and pay-off, but loose trade-in, instead of increase my loan for new? What are the pros and cons?

Thanks for any advice.


I would at least plan on keeping it until 100K miles. At that point you need to decide on expensive items like timing belt. If you like the car, I see no reason to trade, especially since you have a balance on your loan left. You may be able to refinance your loan with the bank without trading cars.

Reminder that at 60K you need to do the complete 60K service for the Forester. If you do that, then you are pretty much invested to 90-100K mile mark. This keeps your car in good running shape.

As far as $$$$ is concerned, it’s better to keep a car well past loan repayment, start making payments to yourself in an interest accumulating account, and save as much as possible for the next purchase.
Otherwise, you’ll have to rationalize the purchase on lifestyle changes, safety issues and color preference, all of which are bad investment choices.

You are normally $$ ahead by keeping. You’ll spend more money overall by trading frequently, because you’ll be paying for the big early depreciation hit more often.

Have you looked into refinancing at a lower interest rate? Check out local banks and credit unions, they might be able to help.

If your looking at this as to what is BEST financially…

Keep it until it becomes too costly to repair. Trading every 5 years is NOT good financially.

Here’s what my wife and I started to do over 20 years ago…

Buy a decent car that fits our needs…Took out a 4 year loan. Paid loan off after 4 years BUT keep making payments to ourselves for the next 6 years. We used the money in this account to pay for any repairs that cropped up. Then when we needed to buy a new vehicle we bought it with CASH. We bought EXACTLY what we wanted…and still had some money left over.

Cars are very long lived these days. I would keep the car to well past 100,000 miles. Perform all the required maintenance and you will come out ahead on a cost/mile basis compared to trading.

The only reason to trade more frequently is when your employer and job requires a late model car. A 5 year old car is as reliable as a new one with good care.

As mentioned by others, at 100,000 miles there will be some major expenses, but then you will not have those again till 200,000 miles.

I have a number of friends who use their vehicles for work and routinely get to 200,000 miles wilth good care and no major (engine, transmission) failures.

If you trade in now, you will at best break even and may owe something depending on the trim level of the Forrester. I suggest that you keep it at least until the loan is paid off. If you keep it for another 10 years, you will have about 200,000 miles on it. You can be way ahead in saved money as Mike said. I’ve done the same as Mike and haven’t had a car loan in 25 or more years.

I’ll second that; I paid cash for my last car and the last time I had a car loan was in 1978, and that was paid off in 2 years.

Stop BSing yourself. You are just going deeper into debt. This is NOT a good plan…Drive something you can afford…

Amen to that, Caddyman.

Thanks for your replies. My instincts were to keep it, but wasn’t sure if, yes going into more debt, but does it pay-off with a “better” (less miles, warranty, all that jazz) car. Plus, I would keep the new car for longer and know what the first 25k miles were like - I bought the old one used.
I do not like debt and pretty close to erasing it, but wasn’t sure if I could trust my car now and possibly loose out on a trade in. I should just trust it (I take good care of it) and hopefully the 60k service will help.

Not sure how many payments left on your current car. However once they end remember your old monthly payment x 12 will be far less than annual repair/maintenance bill.

Cars are a combination emotional, financial and logical purchase. Not sure of what your combination is.

I will only say the brand new Forester I got as dealer loaner is a far superior car to the old Forester by leaps and bounds.

5 year plan is not always bad if purchased used 3-4 yrs(50% drop point) and then traded off with little maintenance/repair.

When should you trade?

1: when it becomes too expensive to repair/maintain than car payments each month/year(use your loan payments as a guide)
2: when you think the car might not be as reliable as you’d like it to be(not sure if it’ll start everyday, some odd sound that no one can seem to fix, etc)
3: You’re just plain sick of the car. Nothing wrong with it, you just don’t like it anymore.

Varying degrees of financial incidents occur with each stage, but you get the idea.
Also, it’s lose, not loose
One more thing, it’s almost always better to sell outright than to trade in.

I agree. I’ve paid cash for my cars, the 1995 Bronco has 298k on the clock, but I’m going to hold onto until it litteraly falls appart, somebody makes an offer I can’t refuse on it, or Ford comes out with a Super Duty based, 2 door SUV. The 2003 Mustang was paid for in cash as well, but I’ve been putting about $300 a month in a new car/repairs fund for the last 8 years. I’m really, really thinking buying of the the new 2011 Mustang GT with the new 5.0L DOHC V8.

Good post bscar; under (1), I would add: to those who live in the rust belt, or in states with rigid inspections, you can drive till the car becomes UNSAFE from CORROSION (I had 2 in the past around the Great Lakes), or the state inspection will not pass it unless you spend more than the car is worth.

There is a formal accounting method as well (not recommedned) which states that: “if the annual ownership costs start exceeding the average of all the annual costs to-date”, you should trade, since you are on the upward slope of the annual ownership cost curve. This curve starts high and deceases till it reaches a low point, then starts increasing. That point varies with each car. On a Honda or Toyota, it might be at 15 years, but much sooner on less reliable and expensive to maintain cars.

I could also add a #4, which would be when one’s needs change. This is my reason for getting rid of the Civic and upgrading to an SUV. A few roads around here don’t get plowed right away, and one on my return trip from work, the Civic pretty much bottomed out a few times because the street wasn’t plowed.