Car finance

Old Jun 21st 2019, 9:09 pm
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Question Car finance

I bought a Ford Fiesta when I moved over to the USA back in 2017 I’m thinking of changing my car and part exchanging for a new car, my question is if I still have outstanding finance on my car can I add what’s still owed to a new finance agreement? Or do I have to clear the loan before purchasing another car. TIA.
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Old Jun 21st 2019, 9:19 pm
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Default Re: Car finance

Depends how far underwater you are against the car value. What does KBB say the car value is and how much do you owe?
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Old Jun 21st 2019, 9:52 pm
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Default Re: Car finance

KBB says it’s worth around $8000 but I still have around $14000 outstanding, maybe it’s worth keeping the car another couple of years not sure.
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Old Jun 21st 2019, 9:57 pm
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Default Re: Car finance

$6k underwater is going to be tough to overcome, and if you roll in the negative equity to your new car it's going to have an unpleasant interest rate also. Unless the car is on it's last legs, I would pay it down for at least another year or so before trying to trade it in, and even then you'll take a hit.
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Old Jun 21st 2019, 10:06 pm
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Default Re: Car finance

I think that’s what I will do, the car is in very good condition it’s only got 21000 on the clock I’ll wait a bit longer.
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Old Jun 22nd 2019, 12:19 am
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Default Re: Car finance

Originally Posted by sarasota chic View Post
I think that’s what I will do, the car is in very good condition it’s only got 21000 on the clock I’ll wait a bit longer.
​​​​​​Throw money at principal between now and then.
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Old Jun 25th 2019, 2:05 am
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Default Re: Car finance

Originally Posted by sarasota chic View Post
KBB says it’s worth around $8000 but I still have around $14000 outstanding, maybe it’s worth keeping the car another couple of years not sure.
You bought a Ford Fiesta two years ago and still owe $14,000? WTF???

Several of us have been butting heads recently over the merits and advisability of financing a car, but you seem to be a text book case of why you shouldn't finance a new car, or at least "how not to do it." Surely a Fiesta didn't cost much more than $14,000 new when you bought it?

We bought a brand new Honda Accord in 2017, (25 months ago) financed pretty much 100% of the purchase, and now owe almost exactly $15,000, which pretty much exactly the average price for a private party sale. If you take the trade-in value we are underwater, but as there is pretty much zero chance of us selling it in the next decade that is irrelevant for us. I will probably take it over in a few years (it is currently my wife's daily driver), but for now I am driving the Accord we bought in 2002, which currently has 357,000 mikes on it.

Bottom line - you need to keep driving your Fiesta for now, and make extra payments to get the loan amount down closer to the trade-in value before it would be sensible to consider trading it. Given that somehow you still owe $14,000 on an $8,000 car I would image you would need to pay an extra $250/mth for the next two years to get the loan a trade value to align in the summer of 2021.

Last edited by Pulaski; Jun 25th 2019 at 2:13 am.
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Old Jun 25th 2019, 2:23 am
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Default Re: Car finance

Sarasota Chic, are you getting fleeced on the interest rate? As a new arrival with no credit score/history I can't imagine you got a great interest rate. I wonder if you can switch to a loan with a lower interest rate?
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Old Jun 25th 2019, 2:42 am
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Default Re: Car finance

Originally Posted by petitefrancaise View Post
Sarasota Chic, are you getting fleeced on the interest rate? As a new arrival with no credit score/history I can't imagine you got a great interest rate. I wonder if you can switch to a loan with a lower interest rate?
Yeah, but getting fleeced on the interest rate equates to high payments - the loan is still probably only 60 months, or even 72 at the absolute most. Granted, a high interest rate means less principal paid off at the start of the loan, but still!

I suspect that that she either bought a car with lots of bells and whistle that added nothing to the resale value two years later, or she plain overpaid for the car. I would have guessed that New Fiesta in 2017 should have sold (cash price including tax, not sticker) for around $14,000, yet she still owes that two years (minimum 18 months) later, meanwhile the trade value of the car has collapsed to $8,000, which isn't surprising given Americans dislike of tiny cars. Her problems are about as much because she made a poor choice of vehicle to buy as because of the poor choice of finance.

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Old Jun 25th 2019, 5:52 am
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Default Re: Car finance

Unless the interest rate is really low getting a large percentage of a depreciating asset financed seems like a particularly poor idea.
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Old Jun 25th 2019, 9:43 am
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Default Re: Car finance

Originally Posted by Giantaxe View Post
Unless the interest rate is really low getting a large percentage of a depreciating asset financed seems like a particularly poor idea.
Some see it as their only option to 'get something reliable'
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Old Jun 25th 2019, 11:19 am
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Default Re: Car finance

Originally Posted by civilservant View Post
Some see it as their only option to 'get something reliable'
Or think any car older than 5 years old is unsafe and a death trap.... No that's just the other drivers on the road
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Old Jun 25th 2019, 11:22 am
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Default Re: Car finance

I honestly think it's because of the high prices of used cars in the US. It's pretty routine to still be paying $10k for something 5 years old, if it's only a matter of paying 50% more on finance to get something that's 2 years old, most people rationalize and get the newer car.
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Old Jun 25th 2019, 2:21 pm
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Default Re: Car finance

Originally Posted by Giantaxe View Post
Unless the interest rate is really low getting a large percentage of a depreciating asset financed seems like a particularly poor idea.
it's already being financed. See OP's first post.
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Old Jun 25th 2019, 2:37 pm
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Default Re: Car finance

Originally Posted by civilservant View Post
I honestly think it's because of the high prices of used cars in the US. It's pretty routine to still be paying $10k for something 5 years old, .....
This is certainly true, and small "buy here, pay here" dirt car lots in my neck of the woods routinely ask $3k- $5k for mobile junk heaps - with minor dings and scratches and badly oxidized paint. Although my Accord is starting to show it's age, it still looks pretty good, and I think it would still retail in the $3k - $5k range despite its high mileage, and probably more if I got the (minor) scrape on the left hand side rear wing fixed and got it a cheap respray (the paint is now very thin on the roof).

Last edited by Pulaski; Jun 25th 2019 at 2:43 pm.
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