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I spent 10 years in the Air Force and noted a general, sweeping stereotype of many military folk. While many were content to have a 3-4 year old decent ride and feed their families, so many had to have things beyond their reach. This certainly spreads into the rest of society, but in the military, it's especially ironic, since you know exactly what your neighbor (in base housing) or roomate (in the dorm) makes, down to the penny, given that you know their rank (easily obeserved) and time in service (easily figured out).
In 1988, at Dyess AFB, as a SSgt, I couldn't be thought of as impoverished, so I had a 1987 Toyota Corolla FX-16 and a 1988 Mustang GT. I also had two part-time jobs, no days off at all, and only one evening off per week, where I spent worrying about how we'd pay the bills.
It's an easy trap to get into.
Being upside down in a car is very common, and mostly accepted in society. My previous comments were designed to hopefully pull some of the air out of other's comments that were fairly insulting, yet based on skewed data and ideas.
After a couple of painful mistakes early in life, I learned that I sleep much better if I spend a little less than my income.
(car, house, whatever)
Then end up over their head and whine about it in a public forum ????????
Some comments both good and bad are deserved !!!
Need is a very subjective term in the car world.
Transportation is nearly never what it's about.
"You are what you drive" is the mantra on the west coast, and elsewhere, it appears.
I've had tons of fun in rental crap because I just enjoy driving. Driving something nice is better, but driving at all is the deal. Most don't share this point of view.
I dunno about "acceptable" and if it matters. It's a fact that lots of people are upside down, maybe half.
But whether the auto industry "thrives" on this -- it's a difficult question. Lots a people are trading too soon, and rolling "negative equity" into the new car. How often can you do that before the dealer says, sorry, need $$ or I can't do it? For many folks, they're done trading until they can find some cash.
A lot of cash was found by refinancing houses. That's gonna get tougher as interest rates rise. Without outside cash, the domestics have a huge edge by giving $4-5k rebates to hide the negative with... that is one reason the big rebates continue... I don't know if you could bury $4k neg in a Camry, where it would be safer than in a Mitsubishi, say.
IF more and more people find they can't trade anymore because they are too far in the hole, that is going to affect the domestics in a huge way. What do the salespeople around here think? Do you have to turn people away more often? Do you see this as a big problem for the next coupla years?
As a friend of mine likes to say "Where would the world economy be if the American consumer behaved responsibly?"
-Mathias
The BEST course of action is to keep your ride until you have your **NEXT** car paid for ...
Great idea, just not very feasible.
Discipline actually works.
My youngest son has a 1990 Nissan 240SX that has repeatedly embarrassed Mustangs and Camaros, and is going into the shop tomorrow to get its new engine and transmission - the engine is a non-turbo dual cam, bored .030 over, that has dyno'd at 288 hp at the crank....that'll translate to 220-230 at the wheels, in a 2300 lb car....do the math.
My oldest has an Eagle Talon AWD with over 300 hp at the wheels - and is AWD, like I said - can't do that with a Mustang, although if they made an AWD Mustang, I'd buy it.
I just bought a supercharged Saturn Ion Redline for my daily driver and weekend playtoy. Should be fun.
Car_man
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I financed for 72 months because I didn't want a high payment, and more importantly because of the zero-percent interest (no extra cost for stretching the loan). I saw this offer as having the benefits of a lease (new car for affordable payment) without the drawbacks (no finance charges or mileage limits and I can sell whenever I want). However, reviewing this forum I see that many disapprove of this option because of depreciation.
I didn't figure this would be a problem because my trade-in was paid for and I got a great deal. I financed $19500. Now I owe $16450 with 60 months remaining. Terry over in "Real World Trade-in Values" appraised the Ford at just under $15000 trade-in, or about $17250 retail.
My question is, do you guys think I will build any equity at this rate? My payments are $275 a month. I've kept it nice, am not putting excessive miles on it, and might not trade for another year or two.
kirstie_h
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Whether you "build" equity or not, the car will depreciate the same amount... Depreciation plus interest is what your car expense really is, despite positive or negative equity.. If you had put $5000 down on the car, it would still be worth the same amount, and the expense would be exactly the same.. even though you would have $5K more equity in it.
But, if you need positive equity to buy another car, then Kirstie is correct.. It will be sometime in the last 18 months of the loan, before you are even..
regards,
kyfdx
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Look at it this way. You could take $5,000 from wherever it is invested (earning whatever it is earning), and pay down your loan to put you ahead. Or, keep that money in the bank, earning interest, and supplying an emergency fund. Or put it toward a house, buy stocks, or whatever. If you put it toward the loan, you are making your effective ROR on the money 0%.
If you are worried about trading in when you have neg equity (like now), put the money toward the payoff then. Or keep the Explorer, and the issue is moot.
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
We would like to buy a new car. Actually a minivan. My loan payoff on this car is $8,736 while the KBB value is about $4,500. I have 31 payments left. I have been a SAHM mom for two years and I tried to re-fiance this loan before to lower the interest rate but was turned down because I am not employed.
So my question is...should we try again to refi this loan and lower the interest rate? Also by getting a lower interest rate will that make the payment lower? Also will the amount I actually owe on the loan be closer to what it's worth?
OR...
Should we just suck up the $4K negative equity and get the new minivan? I know our payment will be higher than what we pay now.
Thanks!!
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As far as the minivan, I personally decided to buy one used after I found out what how much (little) I am likely to get for my 2-year old Accord, our first and likely last new car for a while (I need a minivan, too).
Figuring all this stuff out is so complicated and confusing...
In other words, roughly how many months into each of the above scenarios would a buyer need to be to break even?
What was the LTV?
What kind of car?
What mileage do you drive?
How well is the car maintained? And the list could go on.
Another one?
Assuming no negative equity rolled into the loan, and no more than 60 month term, almost anyone will be right side up, once they have made at least 2/3 of their payments...
So, 32 payments into a 48 month loan, or 40 payments into a 60 month loan..
Of course, if people could keep a car that long, they most likely would never even wonder about negative equity, anyway..
regards,
kyfdx
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'11 GMC Sierra 1500; '08 Charger R/T Daytona; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '08 Maser QP; '11 Mini Cooper S
From the posted amounts, Bender does not seem to be too off base with value and loan balance, but as I understand it Explorers depreciate fairly rapidly.
The other drawback to extended loans is that you are making payments long after the vehicle is off warranty when you will likely be beginning to have repairs.
I agree with kyfdx, if Bender can build his/her own separate equity (account) by being disciplined enough to put a small amount (even $50) away monthly. You just plan for $325 a month payment and sock the $50 away.
i have an '02 eb. i took the zero for 5 years. at the time the rebate was 2k, so it wasn't a tough decision. at some point the rebate went to 4500, although it isn't there now. that is what's hurting me. i've been wanting an '05 to add some more toys, but since i don't want to put down any cash, i'll have to wait, no matter what i might buy. i still enjoy my '02, so life isn't exactly miserable in the mean time.
I hope people realize that if they are buying a fast depreciating car with no money down, they ought to buy GAP INSURANCE.
What has that got to do with GAP insurance - if an accident isn't your fault, you wouldn't pay a deductible anyway...
But hey, it's like ABS and Side Curtains .. folks think they will never have to use them, so they don't want to pay for them ...
Terry.
Okay, here is a sad one. I currently have 18 payments left on a '02 Jeep Grand Cherokee Laredo. Terms are 48mo/15k. I currently have 63k on it. My payoff is $21,250 and I have an average appraisal of on the vehicle of $13,500. I have access to GMS and am looking at anything General Motors to try to combat the negative equity. I am weighing the options of getting out now or paying $.15 per mile at the end. Should I lease again or stay put or should I try to finance???
Any suggestions welcome...
How on Earth did you get yourself in this predicament. 4 year lease at 15K/yr and only 30 months into it you are already at 63,000. OUCH!
With a lease you have no equity, negative or positive. Thats what a lease is all about. You pay only for the portion of the car/truck you use. Your problem is the payment for excess miles at lease end. Cheapest way out may be to just buy it and sell it yourself at lease end. You are going to pay no matter what. Can't drive a car/truck 96,000 miles and have it worth anything substantial at that point!
And remember, you can never borrow your way out of debt!
Buying it may be a lot worse than sucking it up and paying the $0.15 per mile. If it were MY Jeep, I wouldn't loan it to people for a lousy $150 bucks every thousand miles... I think that's pretty cheap for a $30+ SUV.
Just hope it doesn't cough up a tranny or something... it IS a Grand Cherokee...
-Mathias
(b) letting sit as I pay $550.00 for next 18 mos???
(c) or trying to widdle down
approximately $8000 in negative equity.
I do have access to Ford friends and family and to a GMS from my father. What if I got it down to -$2000.00 or -1500.00 with rebates and discounts. Is it worth it then???
If you go 30K over the mileage limit, it will actually add less than $100/mo. to the cost of the lease. So, as Mathias pointed out, it is really a cheap way to put that many miles on a nice SUV.
(30,000 * .15 = $4,500, 4,500/48 = $93/75/mo.).
Look at it this way, if they told you when you got the lease that you could do 48/78,000 for an extra $94/mo., and you knew you needed the miles, would you have done it?
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
However, knowing your history the real problem may be that the new smell has worn of it and you're itching to change it, which may not be so easy with that much negative equity, but I'm betting it won't stop you.
You are $7750 underwater right now..
If she drives it for 18 months, it will cost you $9900 in payments plus $3375 in mileage charges.. (22,500 X $0.15).. for a total of $13,275.. giving you a net cost of $5525 extra to drive for 18 months.. $5525/18 mo. equals $292/mo. for your wife to drive it...
Still...its not cheap.. But, since you are getting a company car, you will only have the one payment, and won't have to pay the mileage penalty until the end...
And.. using a car with big rebates doesn't get rid of the negative equity.. If Joe Blow buys the Tahoe for $40K, and gets $8K back in rebates, then the car is worth $32K.. If you use the rebates to cover the negative equity, you still owe $40K for a car that is worth $32K.. You haven't gained anything, but another big payment.
At least by keeping the Jeep, you will pay yourself out of debt over 18 months...
regards,
kyfdx
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So basic, so simple, so obvious, yet apparently so little understood.
I know several people who are convinced that their vehicle is worth MSRP and that the rebate is free money!
-Mathias
Now as for the new car smell wearing off, nah, I like the truck, just a bit frustrated with the dealer. If I wanted a new car I could trade my Focus, but won't since its given me no trouble in 6 mos/20k miles.
I *think* I've chilled out, I want a house not a new car.
I have to say I'm not impressed with Nissans. I have a friend with a Murano which was hit from behind, it's been off the road for 7 months waiting for parts - unbelievable.
Its not the end of the world though, we have our 04 Focus (great car) and our 99 Ram (excellent truck) so we are in good shape.
So basic, so simple, so obvious, yet apparently so little understood.
I know several people who are convinced that their vehicle is worth MSRP and that the rebate is free money!** ...
I do this every minute of everyday, "trying to splain' the negative equity" ... the greatest statement I hear is, "if I would have known that I was going to drive the extra miles, I would have paid for them upfront" .... the point is, whether it comes out of the right pocket or the left pocket, it's coming out of the same pair of pants .. whether you paid then - or now, you still pay for those miles, and thats okay ..
You have alot of good information here -- read it - understand it - and follow it .......... Keep the Jeep until the lease is up.! ... or, trade it and have $15/$20 grand of negative equity already built into a new vehicle, then you have no control because the lenders will stop you from buying your next vehicle ~ and thats when it gets reeeeal ugly ............
Terry.
Signed,
Driving Fool