Am I a whole lot of nuts for wanting to sell this thing? v.dealerwantstogivemenexttonothingforit

<div class='quotetop'>QUOTE(galaxee @ Feb 25 2007, 06:09 PM) [snapback]396395[/snapback]</div>

I was thinking it must have been a credit union. Thats a great rate, even with a 790 score!

 

<div class='quotetop'>QUOTE(SW03ES @ Feb 26 2007, 11:01 AM) [snapback]396771[/snapback]</div>

Last November, my husband and I got 5.5% for a 72 month term at a credit union with credit scores of about 690 and 710. Our payments are about $450 per month.

 

If you are determined to sell the car, then your best bet is to fix the damage, and sell it yourself (if logistically possible). I have trouble seeing where you will be better off if you are underwater on your Prius now, and you sell it at a loss and start over with another new car, though, but perhaps that's just me.

 

<div class='quotetop'>QUOTE(Beryl Octet @ Feb 26 2007, 11:43 PM) [snapback]397068[/snapback]</div>

Nope, me too.

From the standpoint of money, your net worth in the Prius is what it is -- it's the current negative equity (loan value less car value). Nothing will make that go away. Your options are:

a) Go out and buy more car than you currently own (trade up to a new 2007).
b) Go out and buy less car than you currently own (sell the Prius, buy something that costs less than the current trade-in value of the Prius).
c) Keep what you already have.

One year from now, in any case, your "net worth" in cars =
current negative equity
- depreciation of car
+ amount of loan principal paid off.
- transaction cost (markup) if you switch cars.

No matter what you do, current negative equity is fixed. Beyond that, the older and cheaper the car, the lower the depreciation, and for a given monthly payment amount, the higher the fraction of the loan balance you may pay off.

That argues for trading down to a less-expensive car. But you have to bear the transaction costs in mind. If you trade down, you instantly lose the value of whatever dealer markup exists on your replacement used car. (So, if you decided to sell the Prius and buy a $15K used car, the resale value of that, to a dealer, might be $12K -- an instant $3K loss.)

If you want to get out from under the burden of negative car equity, the worst possible option is a), buying another new car. You'll take another $10K in depreciation the first year or two, and you'll be able to pay down the loan only slowly. Depreciation is large, loan payoff is small.

Whether you'd want b) or c) depends on what you could buy for less than the trade-in value of the Prius. My take on it is that dealer markup is such a deadweight loss that you're better off with what you have, unless you are willing to go way downmarket from your current car.

Imho, if negative equity is what's driving this, the only reasonable thing to do is keep what you've got and refinance it. Second best would be to move to a substantially cheaper used car, if an acceptable one exists. (So that the lower depreciation more than offsets the cost of making the purchase - the $ lost to dealer markup). Absolute worst option is to buy another new car. Second worst option is to trade to a used car of value roughly equal to the Prius.

 

Ditto that. Prius was never the cheapest car to operate, and no one should ever borrow money to buy a new car.

 

I traded in my 05 Prius PKG 5 and got $19,500 plus sales tax @ 9.1% in Nov 06 for a total of $21,275.50. It had 29,987 miles on it. I managed to trade it before the 30,000 mile service.

They advertised it for $23,999 in Nov/Dec 06 which I thought was ambitious. They then dropped it to $21,999 in January 07 and today I see it is still there and now priced at $19,999.

Kind of feel good that I made the decision when I did and got rid of the rattle box. It took me less than 4 seconds to pull the trigger when they offered me $19,500 given what I was starting to see in the market here.

Here in the Seattle area, there are plenty or Priuses on the lots and they are offering 0% financing. And Seattle is most certainly Prius country - what is going on? Was GM right all along? That this was a short term opportunity for Toyota - ok, roast me!

 

<div class='quotetop'>QUOTE(richard schumacher @ Feb 27 2007, 11:59 AM) [snapback]397237[/snapback]</div>

Dangerous heretic! Where would that sort of thinking end? People should "live within their means" maybe? Next you'd see people buying only as much house as they required to live comfortably. Or shopping only when they actually needed to buy something. McMansions would go unsold. Car dealerships would close. Our carefully constructed system of national chain-store malls would become ghost towns. Our record-setting negative savings rate would be history! Worst of all, what would become of the Home Shopping Network?

You really need to consider the broader repercussions before you make dangerous statements like that. B)

 

<div class='quotetop'>QUOTE(chogan @ Feb 27 2007, 05:28 PM) [snapback]397479[/snapback]</div>

and I was so hoping for some classic car investment status, sort of like a studebaker or avanti. Too many and too long lived, now.

 

<div class='quotetop'>QUOTE(chogan @ Feb 27 2007, 05:13 PM) [snapback]397467[/snapback]</div>

who says borrowing money to buy a car means one is not living within one's means? just because some of us are getting started in life and don't have 5 figures laying around to drop on a vehicle doesn't mean we don't know how to live within our means...

back when we bought our prius, we could afford to make triple car payments and planned on having that sob paid off in just under 2 years. and had circumstances not changed, we'd have a paid off car today with very little paid for the privilege of owing anyone money. how is that not living within one's means?

besides, how does one build credit when paying cash for everything? it's not like many people can afford to buy a house without financing...

i agree there's a smart way and a not-smart way. but borrowing money for something doesn't necessarily correlate 100% with bad financial decisions.

 

Deevan,

Do you live in a state where one can prepay just the principle on next month's installment? If so sending in 1 full payment and next month's principle may make the most sense.

 

<div class='quotetop'>QUOTE(galaxee @ Feb 27 2007, 07:55 PM) [snapback]397546[/snapback]</div>

Oh, now, I was being ironic. There is such a thing as prudent borrowing for personal consumption. But the norm now is so far beyond what was historically considered prudent that it's tough for an older person not to take potshots at it.

Personally, I'm right where Richard Schumacher was: I drove cheap used cars until I had the cash in hand to buy a new car. Damned if I was ever going to borrow money to buy a car. In retrospect, that may not have been optimal, given the time and efffort requried to keep a beater running. But it was my attitude.

What I was reacting to is that, for most people, there's nothing even close to any rational analyis of the tradeoffs. My favorite quote about money is from Remarque (author of "All Quiet on the Western Front"), who said: "The true idealist worships money, for money is coined freedom, and freedom is life itself." My all-time favorite author on frugality, Amy Dacyczyn, echoes that in asking people to calculate how long they must work to buy any particular consumer item, before they purchase it.

In my warped opinion, people routinely enslave themselves by not calculating how many hours they must work to pay for fill-in-the-blank. And easy credit -- ah -- that's the anesthetic that makes it happen. Painless purchases. I purposefully pay cash -- literally 20s out of my wallet -- for just about everything, just to make sure I experience the pain of piling up great stacks of greenbacks and handing them over to somebody else. As opposed to swiping a card and signing my name. It keeps it real, so to speak.

Well, OK, I'm clearly on the fringe. But Schumacher's point hit home with me. In the context of the current debt binge, there's a lot to be said for turning your back on the lure of credit. Some people can take appropriate advantage of credit availability. But I don't think that's the norm.

 

<div class='quotetop'>QUOTE(chogan @ Feb 27 2007, 11:41 PM) [snapback]397656[/snapback]</div>

That's some excellent advice there, but I fear we are dinosaurs, especially on the cash business. I'm amazed when I see folks putting a $4 "snacker" at a fast food joint on the plastic...

 

<div class='quotetop'>QUOTE(KatJavandel @ Feb 26 2007, 11:09 PM) [snapback]397058[/snapback]</div>

But is that a refi? Rates like that aren't amazing on a new car purchase, they ARE amazing on a refi.

Yopur thinking is outdated.

Its true that nobody should ever spend more on a car than they can afford to spend, but nowadays cars cost so much that if everybody waited until they could afford to pay cash for a car, they'd never own a car. With modern student loans and the high prices of real estate young people have no choice but to borrow money to purchase cars. They just have to make sure they make smart decisions

Now, I could write a check for pretty much any car I wanted to tomorrow. As a matter of fact, I could pay off the $12k we owe on the Prius right now without even having to transfer any funds, I could just write a check out of my checking account. BUT, because of the way I have my finances set up and my capital invested, I would LOSE money if I used cash to purchase a car. In short, car loan money is so cheap (5-6%) that I make more money on my money as its invested then it costs me to borrow money for a car.

For my car since I own a business leasing only makes sense because of the tax advantages. I own the one I have right now outright (bought it out of the lease when I sold my last business and started this one to help cashflow at first) but the next one I will absolutely lease.

The sentiment behind your comment is sound, meaning debt free is a worthy goal. Its short sighted though. In todays world tying up tens of thousands of dollars in a depreciating asset when it could be making you money somewhere else doesn't make any sense.

As a matter of fact, I was at a Mercedes dealer yesterday and looked at an S550 ($97k or not, amazing car lol) and they have a balloon finacing and balloon lease option that I found attractive from a cashflow and asset management point of view. Now, I could go pay cash for that car if I wanted to, but I wouldn't.

 

use it right and credit is a powerful tool. it's the convenience factor and the separation from the actual concept of spending money that gets most people.

 

<div class='quotetop'>QUOTE(galaxee @ Feb 28 2007, 12:12 AM) [snapback]397667[/snapback]</div>

Absolutely correct. To say however that nobody should borrow money to purchase a car is short sighted. Credit is something that is abused in America, like alchohol. Thats like saying nobody should ever drink.

For instance everybody is always in such a rush to pay off mortgages. Not me, I'll have an 80% LTV until I retire, and depending on how my retirement is structured maybe not even then. With mortgage interest being tax deductible, again it makes no sense to tie up the capital in the house. As the house appreciates I access the equity and put it into other investments to keep me at 80%.

As a matter of fact I'm kicking around purchasing a few investment properties. The financing? Negative amortization loans. Helps my cashflow, I get tax breaks on interest I can defer, makes no sense to do it any other way.

 

as for us, i'm glad we didn't use all our resources to pay off the car. if we did, we wouldn't have had a savings account to get us through some very bad times. i'd take a $16k car loan over having paid out all our medical bills on credit cards.

while our situations are very different we see things similarly. i hope that means DH and i will end up in good shape someday :lol:

 

You will, just stay smart. Get a GOOD financial planner. You think I made all these moves on my own? No way. Safe, stable investments. 10% ROI for an investment is great, hell take 6. Start a savings plan now and commit to it, even if its only something small like $50 a month. Get one of those ING orange accounts and put it in there. If you have to skimp on food to save that $50, do it. If you can get to where you can steer 10% of your income into a well structured series of investments and take advantage of 401k and IRAs, you will be wealthy one day no doubt. The reason Americans have nothing is they buy s**t instead of save and they just never do it. All you have to do is do it.

You're exactly right by the way. It makes no sense for you to pay off the car obligation when you have that great rate and then pay the robbery credit card companies charge because you paid off the car. Student loans are the same way, the rates are so low and the interest is tax deductible (to a point) just keep em forever unless the cash is earning you less than the rate. The estate attorney can pay em off LOL.

The real vice is credit cards. If the people who read this take one thing away from this its NEVER EVER get behind on your credit cards. The way they are structured and the rates being as high as they are once you have a balance so big you have to make payments on it you'll never get out from under it. They are insidious as hell. You have to have them, you need 4 lines of open credit to optimize your creditworthiness, but buy things and pay them off. No balances.

 

Come on.. Everyone knows trade-in value is pathetic.. but we do it anyway. Plus, at least in Honolulu, you only pay taxes on the difference.

BOOYA

 

<div class='quotetop'>QUOTE(desynch @ Mar 2 2007, 07:17 PM) [snapback]399337[/snapback]</div>

Yes, in Washington it's the same way. I traded in a car that was worth $10,500 but I owed $7,000 on it. The whole $10,500 portion of the new car was tax free. This saved $1,000 dollars!