My wife and I share a 2008 Caliber with ~42000 miles on it. (I take the train to work, and rarely drive.) We bought it used in 2009. It has KBB trade-in value of $7000 to $9000. We owe about $6000 on it.
Recently, we have been getting offers from dealerships in our area to pay us above KBB value for our car -- $9000+. Since we qualify for employee pricing on new vehicles, we have been toying with the idea of trading in our current vehicle for a new car. Recently, our credit union started offering a rebate of up to $4000 for financing a new car.
I budget $1000 per year for maintenance of my now out-of-warranty car. Since a new car would come with a 3 year warranty, I would consider it a "break-even" proposition to come out of a "trade-in, buy-new" deal with a $9000 loan balance ($6000 + $3000). This is the approximate deal of buying a $17k car after employee pricing, credit union rebate, loan payoff, and trade-in value.
Obviously, the intangible benefit of a new car vs. a used car is worth something, but on paper that seems like at least a break-even proposition. Am I missing something?
Trade in a car?
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paxprobellum
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- Joined: Mon May 23, 2011 8:22 pm
In theory I can imagine enough rebates and incentives to make buying a new car a valid deal... In practice I don't think it is likely.
I'd run the numbers, maybe even make a few calls to verify (ie: trade in might change with employee pricing, and/or fees with loan origination/maintenance kill rebate deal) but in the end I think a used car is always the way to go.
In my mind the best way to own a car is not using it to commute, fully paid off or arbitrage interest rate loan, fully depreciated (hopefully appreciating), permanent plates and insurance by the mile.
I'd run the numbers, maybe even make a few calls to verify (ie: trade in might change with employee pricing, and/or fees with loan origination/maintenance kill rebate deal) but in the end I think a used car is always the way to go.
In my mind the best way to own a car is not using it to commute, fully paid off or arbitrage interest rate loan, fully depreciated (hopefully appreciating), permanent plates and insurance by the mile.
These offers to pay "extra" on a trade-in are usually accounted for in the price of the new vehicle. Honestly, the way I would look at it is that now you have a car and owe $6000. If the car runs well, even better. The alternative is having a car -- that may be newer, but may not be as reliable -- and owing $9000.
Unless your current vehicle is broken down, I would not increase my debt level to get the same functionality in transportation. With even minimal maintenance, you should be able to get another 40-50K miles out of your current vehicle easily and then recover a few thousand from it.
Now if they simply are offering the cash, without the requirement to buy a new car from them -- I say go for it.
Unless your current vehicle is broken down, I would not increase my debt level to get the same functionality in transportation. With even minimal maintenance, you should be able to get another 40-50K miles out of your current vehicle easily and then recover a few thousand from it.
Now if they simply are offering the cash, without the requirement to buy a new car from them -- I say go for it.
Do you understand how the credit union rebate works? I've never heard of that. I am immediately suspicious of a CU that is trying to push more debt on their members.
My loan calculator says the CU would be making about $380 from you, why would they want to give you a ~$3500 gift? ($9000 loan, 3 years at 2.7%)
I suspect you are missing something, but I don't know what. I would start by picking a new vehicle and getting the actual deal down in writing from all parties. Frequently there is fine print, such as "loan on the new vehicle is thru the dealer's bank" etc (oh, in my state I would have to pay 6% sales tax on the full value of the car)
Personally, our car buying strategy has always been to buy new and drive it 12 years (about 200,000 miles - usually rusting out in our snowy state at that point). I've never understood why people what to get rid of cars at 100,000 miles.
My loan calculator says the CU would be making about $380 from you, why would they want to give you a ~$3500 gift? ($9000 loan, 3 years at 2.7%)
I suspect you are missing something, but I don't know what. I would start by picking a new vehicle and getting the actual deal down in writing from all parties. Frequently there is fine print, such as "loan on the new vehicle is thru the dealer's bank" etc (oh, in my state I would have to pay 6% sales tax on the full value of the car)
Personally, our car buying strategy has always been to buy new and drive it 12 years (about 200,000 miles - usually rusting out in our snowy state at that point). I've never understood why people what to get rid of cars at 100,000 miles.
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paxprobellum
- Posts: 81
- Joined: Mon May 23, 2011 8:22 pm