5 yr. Car loan

[Pawlwawl06]

Ok so right now I am expected to pay off my 2.5i in about 4 1/2 years. Right now, I have about 12K left to pay off. Is it possible to trade in a car before the bank loan is payed off without much of a hassle? I want to trade my 2.5i in a few years and put the money towards a Spec.B or STi. This question probably sounds rediculous, but I'm only 20 . The only option I could think of is to trade the car in and just pay off the remaining balance of the loan. I guess that would make the most sense. Also, I hardly have a credit rating. My first few payments on my 2.5i started to establish a bit of credit rating.

[G.T.Subie]

Yes you can trade it in with $$ owed.

[Metal2You]

Yeah, you can trade it in when you still owe money on the loan. It works out better if you are not upside down at the time (IE: you want to owe less on the loan than the car is worth so the extra money can go toward the new vehicle).

 

You can do it even if you are upside down, its just more expensive. You'd have to pay the difference between what the dealership gives you for trade in and what you owe on the loan, in addition to the new vehicle price of course.

[TRSCobra]

I traded an 05 Honda S2000 straight up for my 05 LGT. I only had the s2k for 3 months, too! I ended up being upside down a few grand, but I'm much happier with the subaru.

 

It's alot harder to get a loan if you owe more than vehicle that you're trading is worth, even with decent credit.

[TobyR]

If you are looking to trade this in in 2 years you will/should have reached a point in your payment schedule where you have equity in the car.

 

I would not expect to have a significant 'down payment' out of it, but you will certainly be able to get more for it than you owe.

[o2s0i0r3is]

Toby you are absolultey wrong on that statement. Being 20 years old he probally does not have that great of an interest rate, and even if he did about 52% of his payment is going towards interest right now anyway and very little is going to principle. To answer your question paw, yes you can trade it in before the bank loan is paid but its going to be a situation of how much your car is worth fair market value and how much you owe on it. Right now you are at least 2,000 upside down (Ex: your car is worth 20,000 you owe 22,000) what a dealer will do is take the negative dollar about and roll it in to your new loan and now your going to be double negative equity in your new loan. It is done all the time. No bank loan unless your car is in extremely high demand with a 0% interest rate will give you equity in your car within 2 years, to do this you would have to make 170% of your payments on time every month and have had to put at least 20% down payment. Your car is a constantly depreciating item that will lose value faster than you can pay it off. Your only option is to sell it right at retail on the street which is never easy. You will probally not gain any point of breaking even unless the last year of your loan. To trade it in with the negative equity would be possible but most banks will only finance upto 120% of the new cars book value. If you want i will explain how an over advance works but it requires more typing than im willing to do right now.

[o2s0i0r3is]

P.S. this is why i advocate leasing so much.

[Dr.Chris]

Most of the above is true that you can certainly trade the car in at anytime. It is fairly easy to figure out if you have negative equity in the car. Log in to your loan website, or call them to find out what the payoff is. Then go on kelly blue book (kbb.com) or similar site (edmunds.com) to find out the trade in value of your car with milegae and condition. Then just compare the two numbers. If you owe more than the car is worth you are considered upsidedown on the loan. I've heard the breakeven point is usually about halfway through the loan if you put a minimum downpayment. At the point of trading it in if you are upside down, you can either pay the difference in cash, or roll it into the next loan. Rolling it into the next loan is a slippery slope. You will need to stay in the next car much longer before you are in the +. To get tips on car buying check out the website of a local radio show (www.autoscoop.com). The main host use to own a dealership, and he clears up myths about car buying, and helps people understand their situation better. Knowledge is power. Hope that helps...

[Metal2You]

P.S. this is why i advocate leasing so much.

 

If you feel the need for a new car ever few years, yes leasing is a good idea. If you plan on modding a car and/or keeping it running for many years, owning is better.

[Pawlwawl06]

The blue book value was around 17K when I bought it in February and I have about 12K left to pay off. Actually, my interest rate is not too bad. My father cosigned the loan, and he had the second highest credit rating that the dealership had ever seen. Can't remember the actual rate, but its decent. I guess I will plan on making a couple of huge down payments near the end of this year to pay off the car, trade it in sometime next year, then go looking for something new. I had no idea about leasing, would have been a better idea I'm sure. I'm not modding a whole bunch since its n/a, so shouldn't be much of an issue when I trade it in. Thanks for the input guys.

[Garandman]

Most car loans will allow you to pay extra towards the principal each month. Making the extra payment may improve your credit score as well.

 

Yes, you can trade a car you owe money on towards another. Just expect to pay more than if you were doing a straight deal.

[TobyR]

Toby you are absolultey wrong on that statement. Being 20 years old he probally does not have that great of an interest rate, and even if he did about 52% of his payment is going towards interest right now anyway and very little is going to principle. To answer your question paw, yes you can trade it in before the bank loan is paid but its going to be a situation of how much your car is worth fair market value and how much you owe on it. Right now you are at least 2,000 upside down (Ex: your car is worth 20,000 you owe 22,000) what a dealer will do is take the negative dollar about and roll it in to your new loan and now your going to be double negative equity in your new loan. It is done all the time. No bank loan unless your car is in extremely high demand with a 0% interest rate will give you equity in your car within 2 years, to do this you would have to make 170% of your payments on time every month and have had to put at least 20% down payment. Your car is a constantly depreciating item that will lose value faster than you can pay it off. Your only option is to sell it right at retail on the street which is never easy. You will probally not gain any point of breaking even unless the last year of your loan. To trade it in with the negative equity would be possible but most banks will only finance upto 120% of the new cars book value. If you want i will explain how an over advance works but it requires more typing than im willing to do right now.

 

1) I am not 'absolutely wrong' nor did I choose to make a lot of assumptions, jut spoke in generalities. Your presumptions about the loss of value on his car, what you think his APR might be, what his loan schedule is, etc are all baseless and seem a bit excessive.

 

2) Paragraphs are your friend.

[o2s0i0r3is]

1) Your talking to a 8 year veteran in the car business and current new car sales manager and former finance manager, even at a prime rate there is no way in hell he is going to be right side up much less breaking even on his car. There is always someone who thinks they know more than they do who will fill consumers heads with unrealistic expectations.

 

2) Paragraphs have nothing to do with giving someone real information, all that comment did was defer the attention away from inability to make a valid point.

[erikvcl]

1) Your talking to a 8 year veteran in the car business and current new car sales manager and former finance manager, even at a prime rate there is no way in hell he is going to be right side up much less breaking even on his car. There is always someone who thinks they know more than they do who will fill consumers heads with unrealistic expectations.

 

And as an 8-year veteran, you know that a lease is only good for the car maker or the car dealership -- never for the buyer. Look -- I don't blame you for wanting to push leases. You have a right to earn money. The car makers have a right to earn money as well. But if you're trying to help people make the best financial decision, a lease isn't it.

 

Would it be possible for you to show us a lease deal that you've worked lately? I'll crank the numbers and I'll show you why the lease isn't good vs. buying. Of course the best deal is to pay cash for a car.

 

2) Paragraphs have nothing to do with giving someone real information, all that comment did was defer the attention away from inability to make a valid point.

 

> Your car is a constantly depreciating item that will lose value faster than

> you can pay it off. Your only option is to sell it right at retail on the street

> which is never easy. You will probally not gain any point of breaking even

> unless the last year of your loan.

 

That may be true, if you made a valid point. This point you made is not valid. Typically, cars take a big hit in depreciation initially and then it slowly depreciate after that initial hit from that point on. I was even on the loan for my Legacy 2 1/2 years into the loan (60 mo.). It is not true that you don't break even until the last year unless you have the worst loan ever.

[vkchu]

i bought mine used, 3yrs old, where the 1st owner took most of the significant depreciation hit. looking to keep mine for awhile, so thats why i bought.

[tachikaze]

I had no idea about leasing, would have been a better idea I'm sure.

 

Depends. With a lease you're paying for the flexibility of walking away at the end of the term. I've never seen a lease offer that made sense for a car I'd want to keep for 5 years, and if you don't want to keep a car for 5+ years you're buying the wrong car IMO.

 

you know that a lease is only good for the car maker or the car dealership -- never for the buyer

 

Actually the people who have their SUVs coming off of lease now made out pretty well, what with their weekly fill-up cost slaughtering the residual value of SUVs.

[TrueWhiteBoy]

As for the STI part, I'm 25, and just picked up a Legacy GT.

 

Originally I was looking at (just) a WRX and the insurance average for it was 1.5X what I'm paying for the Legacy.

 

I'm paying $90 a month now for pretty much full coverage, and the cheapest I could seem to find insurance for the same coverage was $130/month

 

I'm 25, driving since 17, with a perfect record, so it's something you might want to think about too

[o2s0i0r3is]

I'm curious to know where you are getting your information from about the dealer profiting more from a lease than the buyer. Do you know anything about how a car loan works or how buying a car works? Before i continue this conversation i must know that i am dealing with a person who has accurate sources which you apparently do not.

[subaru_terrence]

I have to say I am a totally noob in this topic...

but I remember I read somewhere that if you sum up all the payments, you might end up paying less with leasing than financing (assuming you will buy back the car after the lease is done)

 

o2s0i0r3is... do you mind to explain the benefits of leasing? May be just pick a brand new LGT as an example?

[Kaos22B]

1) I am not 'absolutely wrong' nor did I choose to make a lot of assumptions, jut spoke in generalities. Your presumptions about the loss of value on his car, what you think his APR might be, what his loan schedule is, etc are all baseless and seem a bit excessive.

 

2) Paragraphs are your friend.

I agree with this guy ^^^^

and this guy below as well

And as an 8-year veteran, you know that a lease is only good for the car maker or the car dealership -- never for the buyer. Look -- I don't blame you for wanting to push leases. You have a right to earn money. The car makers have a right to earn money as well. But if you're trying to help people make the best financial decision, a lease isn't it.

 

Would it be possible for you to show us a lease deal that you've worked lately? I'll crank the numbers and I'll show you why the lease isn't good vs. buying. Of course the best deal is to pay cash for a car.

 

That may be true, if you made a valid point. This point you made is not valid. Typically, cars take a big hit in depreciation initially and then it slowly depreciate after that initial hit from that point on. I was even on the loan for my Legacy 2 1/2 years into the loan (60 mo.). It is not true that you don't break even until the last year unless you have the worst loan ever.

Except for the paying cash for a car part, depending on the interest rate and what your personal financial situation is, sometimes it works out to defer the payments, if you have a better alternative for that cash at the time

 

o2s0i0r3is I had a feeling you were in the car sales business from your previous posts above. Your assumptions about his credit, downpayment, the price he would pay for the car, the market value etc were all, well, assumptions.

I was also ahead of my car's value before the middle of the 2nd year. These aren't new SUV's and trucks we're talking about.

Where did you pull that 52% value from? It would take an approximate interest rate of 16.50 % to have that figure be accurate for his first year. Which is INSANE, I have only ever once seen someone have a car loan that high, and they refinanced within 6 months to drop it to 10% (still shitty).

He has a 2.5i, with only 12k left already. I'll put money on it that he will be ahead of his owed amount well before the "last year of the loan".

[erikvcl]

o2s0i0r3is... do you mind to explain the benefits of leasing? May be just pick a brand new LGT as an example?

 

This is exactly what I asked him for... but he seems reluctant to provide the numbers. Maybe he doesn't want us to reveal the truth -- that there are no benefits.

[erikvcl]

I'm curious to know where you are getting your information from about the dealer profiting more from a lease than the buyer. Do you know anything about how a car loan works or how buying a car works? Before i continue this conversation i must know that i am dealing with a person who has accurate sources which you apparently do not.

 

Wow - you're quite rude. You want to see if I'm qualified before you provide evidence for your claim. Nice.

 

OK, let's break it down by making up numbers since you won't provide them. Let's say you lease a car for $300/month for 36 months. That's $10,800. Will the car's value have gone down by that much in the first three years? Of course not or else the automaker/dealership would lose money. Let's see the numbers for an actual lease so we can run the numbers.

 

Are you sure you know how financing works? With a lease, all of the payment goes to the dealer/automaker. With a sale, the sale price goes to the dealer/automaker and the interest goes to the finance company. How can you say that a lease is less profitable? Unless the automaker IS the finance company (e.g. GMAC), this isn't true.

With a lease, the "interest" is rolled in and it is not disclosed. But of course it's there -- and it always goes to the dealer/automaker.

[Dr.Chris]

From my limited knowledge about leases, the payments per month are generally a little lower as to compared to new. I've head that if you flip cars frequently (every 2-3 years) and drive around the national average of 15,000 miles, and you have a good credit score, then a lease is a good option. If you plan on keeping your car, or modifying it like many Subaru owners do, then purchasing is a better option.

In my last two car purchases I have never been upside down in the loan! I just had a large downpayment for both cars so the value of the car was always higher than the loan. My last car I paid more than 1/2 the car upfront on a new car, and my current car I put over 1/3 down on a used car. It is possible to have equity in a car, every situation is different. That is why I recommended the OP to check the payoff, and then check the CURRENT value of his car with condition and mileage. That is the only way we can truely answer his question.

[AKLGT]

I have leased and purchased cars since I got my first full time job when I was 19 yrs old. I can say from a consumer and lender standpoints, that in MOST cases, leases are not the way to go. Unless you own a business or do not drive much and swap out cars every 2-3 yrs, for most people, buying the car/vehicle makes more sense.

 

As a business owner, leasing would make a lot of sense, however I drive too much and because I like to modify my cars, I don't think it would be worth it. I have a friend of mine who drives his 06 STI very seldom and managed to get a great deal on a lease. his will be up next year and he's trying to figure out what to do. It was a 24 mo lease, pays relatively low monthly payments and put $1500 down at lease signing. When he buys it out or hands over the keys in a year, he will only owe $14K. I'm not sure how he managed such a great deal with his lease, but in his case, he wins.

 

You can always trade your car in for another, however that usually won't benefit you in the world of car sales games. Try and pay down your loan so you pay less interest and more on principal. If you owe much less than what NADA blue book states (and I'm talking trade or wholesale, not "retail") than try and sell the car privately. It's always better to go into the dealer without a trade, even if you have no money to put down. If you are going to look at purchasing a new Subaru in the next 6 mos to a year, sign yourself up for a Subaru VIP program (look in the stickied section). That can take a lot of haggle and hassle and get you exactly what you are wanting at a good price. Some people have been able to get as good or better pricing, however I have found that through the VIP pricing program, there is no second guessing, no haggle back and forth and games to play. It's pretty straight forward and saves a lot of wasted time.

 

Until you are ready, pay your bills on time, build your credit and try and get rid of as much payments as possible (car payments... pay it ahead and pay more than your min payment.) Make sure you check in on your insurance rates as others have suggested because my insurance on the STI vs my LGT is about $30/mo more (I've seen other people with about $100+/mo differences).

[Pawlwawl06]

Ok so I'm looking into the '09 WRX actually. I can have 10 - 12K to put down on it by next summer, trade in my Legacy which will prob. bluebook around 16K? That way, if I need to make a few car payments towards the WRX, the loan will only be for 1 - 2K. Then just finish payin off the remaining loan from my Legacy purchase, which will prob. be around 6K to 7K when I go to buy the WRX. Sounds like a plan to me...in a perfect world lol. We will see how things go though.