Buying an Old Car

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April 30th, 2014 at 6:42:52 AM permalink
Face
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Thanks, Boymimbo, for the inspiration =) I've been torn over this for so long, I can't believe I didn't think to ask here.

Here's the deal...

I have an '05 Silverado extended cab, small V8, 4x4. The KBB value on trade in is $6,200. I owe about $9k. Selling outright is not an option.

The truck itself is in good condition. I'm mostly happy with it. I've had to do nothing to it, and it's giving no sign of needing anything done to it other than routine maintenance and replacement of wear parts. In other words, I don't expect a disaster coming. It needs new front axles, yes, but that's a wear part at this point. And although it's of course rusting, I've managed to keep on top of it to the point that only the driver's rear door will need to be replaced, and that's still a good 2-3 years down the road until it gets that bad.

It has 120k miles. No mechanical issues whatsoever. Even the exhaust is solid as a rock. It has enough power to haul my boat and race car, does good enough in the snow to get me to work and have some fun, like I said, I've no problem with it.

If I maintain my current payment pace, I'll have this paid off right about the time I hit 165k miles. That's... kind of a lot for WNY.

My question is one of economics and utility. If you had an aging vehicle that you were $3k underwater on, but it has so far been very good and reliable to you, what would you do to ensure economic harmony for the future? Pay it off and hope it makes it to 200k? Trade up and carry over the $3k debt? Ditch it all and get a thousand dollar field truck? Gimme some advice! =)
Be bold and risk defeat, or be cautious and encourage it.
April 30th, 2014 at 7:44:04 AM permalink
Mosca
Member since: Oct 24, 2012
Threads: 16
Posts: 385
Double up on the remaining payments, then sell it before it becomes worthless (ie, engine/tranny failure, frame rusted out).
April 30th, 2014 at 7:51:12 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 97
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Quote: Face


My question is one of economics and utility. If you had an aging vehicle that you were $3k underwater on, but it has so far been very good and reliable to you, what would you do to ensure economic harmony for the future? Pay it off and hope it makes it to 200k? Trade up and carry over the $3k debt? Ditch it all and get a thousand dollar field truck? Gimme some advice! =)


The $3K of negative equity is what can be called an "unrealized loss" at this point, but if the vehicle is running fine there is no reason to do anything about it now provided you can make your payments (i.e.: you are working and have not been laid off or forced to swallow a huge pay cut.)

This happened in the housing market a lot the last 6 years. People would say, "I owe more on this house than it is worth!" But they forgot that if they were servicing their debt there was no reason for action. Now a car falls in value and its life will end faster than a house, but the deal is the same. Are you handling the payments? If so, every month is your friend as you chip away at the principal.

Rolling the negative equity to a new vehicle is the totally worst thing you can do. The person who does this is the lump who is sitting in a dealership and being told by the salesman what car he is allowed to buy because his financial situation is so jacked that he has to take what works. If a person wants to be paying $400 a month for 60 months on a Chevy Spark this is the route to go!

Ride it out, when it is paid off keep making imaginary payments to yoruself, pay cash next time. Get off The Man's rollercoaster.
The man who damns money has obtained it dishonorably; the man who respects it has earned it
April 30th, 2014 at 8:14:29 AM permalink
Face
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Quote: AZDuffman

Ride it out, when it is paid off keep making imaginary payments to yoruself, pay cash next time. Get off The Man's rollercoaster.


This was my most considered plan. I've no issue making payments and actually plan to pay $100 - $150 more a month soon, as I'm freeing up some cash and want it paid off faster.

I think the thing that's got me all in knots was what happened to my Dodge. Not only was I a few grand in the hole from depreciation, but the engine assploded just 2k miles passed the warranty. If you toss in all the repairs for that, that $2k in the hole grew to $8k. I've been digging myself out of that hole for going on 4 years now. I guess I've not yet rid myself of the fear that incident caused and worry about it happening again due to the age of my rig (even though the truck is solid)

What about the other option - downgrading? I though buying a 10yr old+, $5k truck would get me out of my hole immediately, but I suppose I'd then have the worry of trading one, 120k mile truck that's solid for another 120k mile truck that's unknown. Think that's too much a gamble for the ~$3k I might "save"?
Be bold and risk defeat, or be cautious and encourage it.
April 30th, 2014 at 8:54:28 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 97
Posts: 6020
Quote: Face
This was my most considered plan. I've no issue making payments and actually plan to pay $100 - $150 more a month soon, as I'm freeing up some cash and want it paid off faster.

I think the thing that's got me all in knots was what happened to my Dodge. Not only was I a few grand in the hole from depreciation, but the engine assploded just 2k miles passed the warranty. If you toss in all the repairs for that, that $2k in the hole grew to $8k. I've been digging myself out of that hole for going on 4 years now. I guess I've not yet rid myself of the fear that incident caused and worry about it happening again due to the age of my rig (even though the truck is solid)


Not to sound like we are back in High School, but there is really no comparing the two vehicles. Mopars of the late 1980s and 1990s teneded to run pretty well up until about 70,000 miles, after which everything broke day after day. OTOH, full size trucks are the one part of the company that GM management did not totally screw up. (That is because the worst executives got "stuck" in trucks but that is another story.) It will not be a refined ride, but the Silverado should be good for 200K miles or more.

You said it yourself, why trade in one old truck for one equally as old? On this one you know all the individuals of what she needs and how she likes to be handled, on a new-old one you need to learn that all over again. And for what? A "maybe" on saving some cash?

There are two kinds of people stuck in negative equity on vehicles. Those who tough it out, pay it off, and never let it happen again and those who trade for a new vehicle, hoping it will help.
The man who damns money has obtained it dishonorably; the man who respects it has earned it
April 30th, 2014 at 9:33:32 AM permalink
Mosca
Member since: Oct 24, 2012
Threads: 16
Posts: 385
Quote: AZDuffman


Rolling the negative equity to a new vehicle is the totally worst thing you can do. The person who does this is the lump who is sitting in a dealership and being told by the salesman what car he is allowed to buy because his financial situation is so jacked that he has to take what works. If a person wants to be paying $400 a month for 60 months on a Chevy Spark this is the route to go!


I will tell you, from the vantage of almost 30 years in the car business, that customers insist on rolling as much negative equity as they can, and they insist on the longest terms they can get. If you try to educate them they get pissed off and leave and never come back.

That being said, your advice, both that which I quoted and that which I did not, is correct.
April 30th, 2014 at 9:53:35 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 97
Posts: 6020
Quote: Mosca
I will tell you, from the vantage of almost 30 years in the car business, that customers insist on rolling as much negative equity as they can, and they insist on the longest terms they can get. If you try to educate them they get pissed off and leave and never come back.


I only lived on the finance end and only for a year and a half, but what you see lasts you a lifetime. Many was the time the buyer's numbers did not work so you say "put the salesperson on" then tell him what you can approve then say, "call me back when the numbers work." The dirty little secret was you and he preferred to just do it that way, Mr and Mrs buyer just want more car than they can afford for "x" per month and don't care beyond that.

They tell their friends and co-workers how the nice man at the dealership paid off their old loan for them as part of the process. And the great "free" services they got as part of it all. The car goes to the house or apartment so much nicer than they can afford as well. It is just that they cannot retire until they are 90 years old.

I avoid most car advice, because too much of the USA is just about get the payment and never pay off. I'm the guy with a 9 year old subcompact outside the office. I'm also the guy who is not a slave to my rie anymore.
The man who damns money has obtained it dishonorably; the man who respects it has earned it
April 30th, 2014 at 10:39:54 AM permalink
Mosca
Member since: Oct 24, 2012
Threads: 16
Posts: 385
I appreciate that there is a place for people who drive old subcompacts. My wife and I have one that changes every three years, and one that we drive until it dies. We just replaced the 2001 Malibu with a used '12 Kia.

But I find it interesting that someone as capitalist as yourself takes a distinctly anti-business approach to how the car business actually works. You don't get paid to educate customers if that education doesn't lead to sales. Everything else is theory.
April 30th, 2014 at 11:16:58 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 97
Posts: 6020
Quote: Mosca
I appreciate that there is a place for people who drive old subcompacts. My wife and I have one that changes every three years, and one that we drive until it dies. We just replaced the 2001 Malibu with a used '12 Kia.


I used to be a motorhead and would sacrifice practicality for style. Next car will be an Escape-sized SUV because it gets almost the mileage the subcompact gets but a little nicer seats and way more hauling capacity, something I have learned to love since buying a fixer-upper home and if I end up doing a 6-12 month abstracting hitch in a boom town.

Quote:
But I find it interesting that someone as capitalist as yourself takes a distinctly anti-business approach to how the car business actually works. You don't get paid to educate customers if that education doesn't lead to sales. Everything else is theory.


I'm more anti-idiot than anti-business. Answering phones all day will jade you at perhaps 50Xs the rate of someone in a dealership by simple volume. Some think they have or should have a 3 day or more right to cancel. Most have no clue of what negative equity is and how it buries you. Most do not understand affording the payment <> affording the vehicle. People, soldiers, making $30 grand a year taking payments of $400+ per month as "no big deal" so they can have a BMW, Mini-Cooper, Escalade, whatever. They don't grasp how much more insurance and maintenance is on this kind of vehicle. People thinking their 610 FICO is "not that bad and it has been going up" so time to get a huge loan.

We would talk before shift or on break and ask, "Doesn't anyone drive junkers anymore?" The average car loan is somewhere near 66 months now. Then there is leasing for when you really want to drive a car beyond your means!

I agree with your second to last sentence. One thing counts in this life---GET THEM TO SIGN ON THE LINE THAT IS DOTTED! Nice guy? I don't care! Good father? GO HOME AND PLAY WITH YOUR KIDS!

But--------the average car buyer is too stupid or lazy to learn any of this.
The man who damns money has obtained it dishonorably; the man who respects it has earned it
April 30th, 2014 at 11:49:41 AM permalink
1nickelmiracle
Member since: Mar 5, 2013
Threads: 16
Posts: 549
You know the risks with the car you own currently so it seems better just to work on your current debt. We don't know much about the trade down car, but I would think the risk would just naturally be underestimated and you could wind up worse off.
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