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  #1  
January 19th, 2007, 02:57 PM
lotus86's Avatar Mega Super Mommy
Join Date: May 2005
Location: Annapolis, MD
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Hi ladies! I am just about to trade in my car for another car and I have a few questions. This could get a little confusing but I'll try to get it all out coherently

I bought my car brand new in Oct. 2006 and put $5000 down. It cost ballpark $21,000. My monthly payments on that car are $356. The problem is, it's an Acura RSX w/ 2 doors, and I found out I was p/g a week after I bought it We have tried to make it work for us, but it's not happening, so I am going to upgrade to something a little bigger. I am looking at a Honda Element. Here's where it gets a little hairy. I have an inheritance from my dad, that pays for my living expenses (including car payments) while I am in school. My aunt oversees the trust fund, and she says that I have to keep the payments at or preferably below the payments for my current car ($356/mo). According to Kelley Blue Book, my car is worth $15,206 as a trade-in. How does trading in a car work? I would like to buy a new Element, but the MSRP is around $21,000. Considering I have paid an estimate of 10,000 off of my car (5k down + 14 months @ $356/mo), what portion of the trade would go to a down payment, and how can I keep my payments less than $350 month? I really appreciate any advice you girls can give me, TIA!
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  #2  
January 19th, 2007, 03:23 PM
3Xblessed's Avatar Platinum Supermommy
Join Date: Dec 2004
Location: Southern California
Posts: 2,745
Have you looked into selling the car yourself? We did the same thing as you (bought an xterra and oopss..got preggo and needed a car that would fit an extra kiddo) and we saved ourselves by selling the car ourselves.

We had to borrow 10K to pay off the car so we could get the pink slip but we ended up making about 10k more than if we had just traded it in (we paid off the money we borrowed and then had a big down payment).
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  #3  
January 19th, 2007, 03:40 PM
BensMom's Avatar Ephesians 4:29
Join Date: Apr 2005
Location: The Lonestar State
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First of all, someone else has already done this. What do I mean by that? Someone bought an Element last year, realized they didn't like it or couldn't use it or whatever, and then traded it in just like you're doing now. It happens all the time. Because of that, it makes so sense whatsoever to buy a NEW car. Go find a brand spanking new "used" car with very little mileage and the factory warranty, and you'll save money! If you really want a new one (and I'm spoiled, so I always buy new even though I know how terrible that is!! ), then I'll walk you through the process...

How do you trade in your car? Take what it's worth as a trade in (which will almost always be at least 1000 below the KBB or NADA value unless you go to a place like CarMax or to a dealership that specializes in your car brand), subtract what you owe, and roll that into your next car price. To simplify that, let's say the car is worth $10k, you owe $5k, so you've got $5k in equity ... that would knock $5k off the price of a new car. BUT if it's the other way around (worth $5k and owe $10k), you'll have to ADD the difference to the new car. Make sense?

As for payments, you'll have to figure out your interest rate and # of months based on the adjusted price of the car. Your interest rate will probably be pretty close to what you have now assuming you haven't done anything drastic in the past few months (like missed payments on other debts). You'll be given payment options of 48, 60, or possibly 72 mos (4, 5, or 6 years... 60 is the most common these days).

You said you bought it for $21k and put down $5k. Does that mean the original price was $21k (making your finance amount $16k) or does that mean the original price was $26k (making your finance amount $21k)? If you financed $16k at $356/mo for 60 months, that means your % is in the ballpark of 12.5%. If so, you still owe roughly $12,600 on it. If the trade in value is $15k, you'll be able to subtract appx $2000-2500 from the price of the new car. (You said you bought it in 2006 but have made 14 payments... I assume you meant to say 2005? )

Ok, so you say the MSRP on the element is $21,000, right? Your adjusted price, assuming they give you $2500 for it would be $18500. If you get the same interest rate again, and if you finance for 60 months, your payment will be appx $415/mo. 72 months would be appx $365/mo.

...crying baby... gotta run.

I'm back. Unless you have awesome credit, you may not qualify for a 72 month plan. Even if you did, you'll be upside down on the value of the car immediately. If you bought an element today and wrecked it tomorrow, your insurance would likely only give you about $17,000 for it. That will continue to decline faster than you can make payments unless you're on a 4 year payoff plan. ...speaking of insurance, since an element is considered and SUV, you can expect your insurance to go up as well. Something to consider.
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  #4  
January 19th, 2007, 03:59 PM
~Jess~'s Avatar Platinum Supermommy
Join Date: Oct 2005
Location: Central California
Posts: 16,959
I got my Camry, brand spankin' new for $17400. It is an AWESOME family car. Okay, sorry, had to plug my car

If you have your heart set on an Element, then I strongly suggest buying used. Preferably, private party. You really ought to sell your current car private party too, you'll probably get more money that way over trading it in.

Also, like Chrystal already mentioned, altho you've paid $10,000 in payments, that doesn't come straight off of your balance. Most (nearly 3/4) of that money went towards interest. Plus, you'll have to pay taxes, license, and fees all over again on a new car as well. So any money that you make off of the sale of your car will probably just pay the fees, leaving zero down. As far as how much car you can buy for that same payment, it really depends on the rate. I'll give you a few different examples. Do NOT, do NOT finance more than 5 years (60 mos)!

12%=payment: $367 amount financed: $16,500
10%=payment: $371 amount financed: $17,500
8%=payment: $370 amount financed: $18,250
6%=payment: $367 amount financed: $19,000
4%=payment: $368 amount financed: $20,000
0%=payment: $367 amount financed: $22,000

As you can see, the interest rate makes a HUGE difference on how much car you can afford.
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  #5  
January 19th, 2007, 04:17 PM
BensMom's Avatar Ephesians 4:29
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Location: The Lonestar State
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Thanks Jess... I KNEW I forgot to mention something! TT&L... see what a crying baby does for your train of thought!
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  #6  
January 19th, 2007, 05:34 PM
Mega Super Mommy
Join Date: May 2006
Posts: 2,667
Quote:
First of all, someone else has already done this. What do I mean by that? Someone bought an Element last year, realized they didn't like it or couldn't use it or whatever, and then traded it in just like you're doing now. It happens all the time. Because of that, it makes so sense whatsoever to buy a NEW car. Go find a brand spanking new "used" car with very little mileage and the factory warranty, and you'll save money![/b]
Gotta agree with this!! (I don't have anything else to add since I know NOTHING about financing cars because we just don't do that.)
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  #7  
January 19th, 2007, 07:07 PM
BensMom's Avatar Ephesians 4:29
Join Date: Apr 2005
Location: The Lonestar State
Posts: 50,214
Quote:
(I don't have anything else to add since I know NOTHING about financing cars because we just don't do that.)[/b]
I lived the first 15 years of my life at a car dealership (dad and grandpa both worked there), and I financed 5 cars of my own between the ages of 16 and 26 (two used, 1 new lease, 2 new buys). You could say I know a little bit about it. The car I have right now is the longest one I've ever kept. It'll be paid off in about 2 months.
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  #8  
January 19th, 2007, 07:22 PM
~Jess~'s Avatar Platinum Supermommy
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Location: Central California
Posts: 16,959
Your dad & grandpa both work at an auto dealership and they didn't talk you out of leasing a car?????
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  #9  
January 19th, 2007, 07:46 PM
BensMom's Avatar Ephesians 4:29
Join Date: Apr 2005
Location: The Lonestar State
Posts: 50,214
Quote:
Your dad & grandpa both work at an auto dealership and they didn't talk you out of leasing a car?????[/b]
They were mechanics, and at the time, a lease was my only option. Remember... my parents aren't just the best at finance. I "needed" (seriously) a certain type of vehicle for my job, and the only way I could afford it was to lease it. Buuuuuuuuuuuuut, I got an awesome beyond awesome deal on the next car when I traded it in, so that's ok.
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  #10  
January 20th, 2007, 08:47 PM
Platinum Supermommy
Join Date: Oct 2006
Posts: 32,940
If you don't know much about cars (the mechanics of it) I'd make sure you get someone who does and who you trust to look over a car before buying it from a private party just to be safe. Good luck!


Even though my husband knows about cars we have bought from a dealer before (we know a Chevy and a Ford dealer so that helps). But when we buy our new (to us) SUV we are not going to trade in the one we have (12 years old/175,000 miles). They'd probably just laugh at us! But we think we should be able to get at least $2000-3000 for it if we sell to a private party. Other than being old and having a lot of miles it is great shape! KBB value is $3400 for a private party sale.
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