Honey and I have been searching for ways to save money on our car loans. With that in mind we were both looking at refinancing our car loans, especially since my credit score just went up.
I tried a couple of places only to be turned down or given ridiculous rates. I went into the local credit union to try that and was told that I was upside down on my car loan. Being upside down means that you owe more on the loan than the vehicle is currently worth.
It turns out that after checking comparable cars, I am owing almost $2000 more than I could sell the car for. This is very upsetting to me because I thought the value of the car was higher. The only thing that keeps me going is the knowledge that the car is in great condition at 64,000 miles even though it is 6 years old.
I had planned on driving it into the ground because I cannot afford to get another car just for having a new car sake. Hey I can always buy the new car smell in a bottle at WalMart!
How are you doing on your car loan?
Are you upside down or right side up?
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How I Pay My Bills
re: thinking the value was higher
Yeah, KBB will give expected depreciation at the time, but the marketplace is pretty dynamic lately.
Buying a used but reliable car is a smart way to go. Your insurance will be a bit cheaper because it’s older and hopefully you can pay cash for it. I don’t like car payments. It always leads to aggravation because you pay longer than you usually want to keep the car.
Jerry
It is the unfortunate drawback to having a car loan. It is typical that you be upside-down as the car depreciates faster than the loan principal. It sounds like you have the right idea though. Keeping the car until well past the time when you pay off the loan is your best bet. 🙂
Wow, I did not know what an upside down car loan was until you wrote about this. It is giving me more reason to look at a used car because a 4 year or older car has already depreciated the most by the time one would acquire a loan for. Granted, there is more risk with a used car because of repair costs but I am not sure if it outweighs the risk of an upside down car loan now.
I agree with Jerry. Car loans are never a good idea. Buy something used and pay cash – no headaches at the end of the day!
Thanks for the comments guys. The thing is that at the time I bought my car I did not have any cash that I could have used to pay for the car.
I will keep this information for future reference but it just was not feasible at the time and I needed the car for work because I lived in an area where there was no public transportation and I had to do a lot of travel for work.
I can certainly understand that. Having the luxury of being able to buy a car outright, even a used daily driver, usually does take time and a strong will to not have a car payment. When I am questioned about whether or not to get finance a vehicle from people I know at work and friends, I usually say for them to look at the total cost of purchasing the car based on the ammortization of the loan.
@ Ralph:
Actually I did look at the total cost of the car as well (although not in the way you are thinking…I think).
I could have had a car with a lower monthly payment…but over time it would have cost more.
When I dealership I told the dealer I wanted to know the total price of the car NOT the monthly payments and he looked at me like I was crazy. 🙂
Bummer about being upside down. Hang in there, pay off the car loan as quickly as you can, and then drive your car until it just won’t go anymore. Every month that you drive it after it’s paid off is money in the bank that you’re not paying on a car loan. My car has 214,000 miles on it (it’s a 91 Civic) and I have no intention of retiring it any time soon. It’s tough to refinance a car right now, with car prices going down on pretty much all but the most fuel efficient models, and credit harder to come by. So I’d say your best bet is to focus on paying it off as soon as possible. Good luck!
i had my car loan last year when i bought a Nissan Murano because i really like to have my first car ,.,