vehicle loan advice... thanks in advance

[blester06]

Ok, here is the deal. I make around 50k a year. I am 27 years old and trying to save for myself and my fiance to get married as well as purchase a home. To my issue. I purchased a new ford truck a few months back. My loan is for 28k at 4.9%. Since than my goals have changed so to speak. I do not need the truck like I thought I needed it. My payment is in the 400's per month. I am throwing around the idea of trying to find a vehicle in the 10k to 12k range.. used of course. To help cut down on the debt owed. Is this a good idea ? Any advice? The truck has 3k miles on it and I am upside down in it. I can get 21k for it but not 28..

Where do I start? Any advice would be appreciated. .

[bjl584]

Do you have any cash on hand? If you sell to a private party you'll need to come up with the difference of what you sell the truck for versus what is owed.

A brand new Ford Truck should be worth more than $21K. I'd think more around the low 30's.

Another option would be to keep it until you aren't upside down and then sell it when you are at the break even point.

[blester06]

The truck was 36k brand new. The trade in value that I brought up online was around 24k. I can sell to a private for 28k. How does that work with the title being held by ford financing? Will they release the title to the buyer instantly?
Also, I was considering trading it in on a much cheaper vehicle. 10 to 12k. You don't think that would be a good idea?

Brandon

[riverwed070707]

The truck was 36k brand new. The trade in value that I brought up online was around 24k. I can sell to a private for 28k. How does that work with the title being held by ford financing? Will they release the title to the buyer instantly?
Also, I was considering trading it in on a much cheaper vehicle. 10 to 12k. You don't think that would be a good idea?

Brandon

I definitely wouldn't take the hit of a trade in. For starters, dealers don't usually like to help you trade down. Try to sell privately to get your full payoff amount and then get the new car. I personally wouldn't take a 7k hit on the truck and then spend $10-12k... that puts you at $17-19k in when you only got $21 for the truck. Not enough savings to justify it IMO. How much do you have in savings? Can you buy the cheaper car outright or will you be financing that as well?

[autoxer]

How does that work with the title being held by ford financing? Will they release the title to the buyer instantly?

No. They won't release the title until the loan is paid up and after that it might take a week or two. It is tough finding a buyer with patience, but not impossible. I sold a car with a lien and the buyer instructed my bank to mail the title directly to him. He was out of state, so we didn't need to notarize the title, making it a little simpler. Talk to your Ford Finance, explain what you want to do and see if they have any advice.

Also, I was considering trading it in on a much cheaper vehicle. 10 to 12k. You don't think that would be a good idea?

Trading it in will be an easier transaction, but will be much more costly.

If you have to roll negative equity into the next car, you better make sure it is one that you are going to stick with for a few years. Mess around with Edmunds True Cost to Own calculator and you can get an idea how much depreciation costs for different vehicles. The other big variable is fuel efficiency. A full size pickup truck is great for a job where you are actually hauling things everyday, but terrible for a commuting to an office. Look for something with low depreciation and high fuel mileage. http://www.edmunds.com/tco.html

10 to 12k may be much cheaper than $36k, but that would still get you way more than basic transportation. When my goals changed and I realized that my car was limiting my ability to save for a house, I bought a 10 year old econobox for less than $2k. I did my own repairs and kept it on the road for about five years. If you are handy with a wrench, then you can bring down your transportation costs considerably.

[Eagle]

Ok, here is the deal. I make around 50k a year. I am 27 years old and trying to save for myself and my fiance to get married as well as purchase a home. To my issue. I purchased a new ford truck a few months back. My loan is for 28k at 4.9%. Since than my goals have changed so to speak. I do not need the truck like I thought I needed it. My payment is in the 400's per month. I am throwing around the idea of trying to find a vehicle in the 10k to 12k range.. used of course. To help cut down on the debt owed. Is this a good idea ? Any advice? The truck has 3k miles on it and I am upside down in it. I can get 21k for it but not 28..

Where do I start? Any advice would be appreciated. .

I'd personally just wait until you were at a break even point to sell it. Unfortunately, you made a bad decision. Selling the truck and buying another vehicle for 10-12k is probably a bad idea as other posters have already pointed out. You will also have more regular repairs with an older vehicle in the 10-12k range so consider that as well.

But really to better understand your situation a few questions:

1) What is your monthly take home pa?

2) How much do you spend a month and are you on a budget?

3) Do you have any savings or investments?

4) Do you have any other debt?

[autoxer]

I personally wouldn't take a 7k hit on the truck and then spend $10-12k... that puts you at $17-19k in when you only got $21 for the truck.

This isn't really looking at the big picture. The 7k depreciation is a sunk cost, you aren't taking the hit when you sell the vehicle, that asset value is already gone.

Before the deal, you have $28k in debt, a $21k truck, that will probably depreciate by another $3k in the next year, and a monthly fuel cost of $250 (assuming 12k miles per year, 15mpg, $3.75/gallon).

Afterwards, you would have $18k in debt, a $10k car, that will probably depreciate by $1k in the next year, and a monthly fuel cost of $150 (assuming 12k miles per year, 25mpg, $3,75/gallon). So you might end up a little more underwater on the next vehicle, but you have lower debt, lower depreciation and lower fuel cost, so you can make up ground quicker. Over the long term, this is a better situation to be in, but the OP can do even better by choosing a cheaper and more fuel efficient vehicle.

[snafu]

Tell the financing company that you must sell the truck privately and start posting pictures and write up on all cheap sources. You take the hit in depreciation the instant you drive it off the lot and it keeps getting worse in operating costs and insurance.

Big picture, I hope you understand the need for 20% downpayment to buy a house. Without 20% down, you are forced to buy very expensive mortgage insurance with no benefits to you. There are a ton of expenses in 'closing' like appraisal, mortgage origination, inspection, municipal tax, moving, utility fees...it feels like everyone has their hand in your pocket. You'll need a minimum of $ 1,000. for all the stuff the incidentals not counting furniture and outfitting the different rooms. I'm trying to keep you from jumping out of the frying pan, into a 30 year fire! People don't understand how a mortgage works. It's not a conventional loan like buying a truck. A mortgage preloads interest. Your monthly payments mainly go to mortgage insurance, regular house and content insurance, municipal taxes, interest and a tiny few dollars to the principal sum you've borrowed.