Downsize car?

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I've been listening a bit to Dave Ramsey and doing more with my money. The idea of selling my current vehicle and buying something cheaper is often brought up in his material. I'm looking for thoughts on if it's the right move.

Currently :

Vehicle loan 21k @ 2.25%
Vehicle worth 22.5k
10k liquid assets
7k mutual funds
~15k retirement funds outside of pension
168k mortgage @ 4.25%
~50k yearly salary

Would selling the vehicle and buying something with the 10k make sense? I'd be car payment free and able to save ~$400 month into retirement accounts. Or would you keep the current vehicle and invest the 10k over the next 2 years and put towards bringing down mortgage principal?

Anything info I'm leaving out?

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nevermind

jaytrader (Dec. 25, 2016 @ 3:05p) |

nevermind

Qzic (Jan. 03, 2017 @ 10:30a) |

Not sure if you're still considering it or not, but I'll throw in my two cents. If you drive long distances, I would dow... (more)

busyryan (Jan. 03, 2017 @ 1:32p) |

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I would get rid of the car, buy a good used car for $4-5K and still have $5-6K of liquid assets.

Generally, the FWF crowd would never recommend someone making $50K spending over $20K on a car.

100% agree in retrospect on the purchase of the vehicle. Just wondering best plan of action moving forward. Thanks for your input.

Best Plan, go to Carmax, get an estimate of it's value. If you don't like it then Craigslist sale!

Actually went to CarMax today. They offered the 22.5k, payoff amount is 21k so I can get a clean break from it. I got a good deal on the truck so I've never been upside down and that's with no down payment.

If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.

forbin4040 said:   Best Plan, go to Carmax, get an estimate of it's value. If you don't like it then Craigslist sale!
  
Carnax will offer the low end of auction value. Carmax is always a bad idea to sell unless you dont have the time or dont want to make an effort.

jaytrader said:   If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.
  
You can run a CL search as well as an eBay one to find out where the CarMax offer comes in.  Their offers are usually a bit low -- unless they are buying for their lot, which in your case they likely are.  There are always local companies that will overbid Carmax by $100-$500 sight unseen too.

Best way to look is "completed sales" on eBay -- its always only worth what people were willing to pay for it.  

I would not deplete your liquid assets (and I am impressed with your savings numbers on a 50K salary and a 22K car) -- see what you can find in the range of your equity.  (I have a glass house here myself -- paid too much for my current vehicle in 2011 but its in the 15K valuation and already mostly depreciated, but I customized it to be exactly what I wanted so I will be driving the wheels off of it)  I made much better money when I bought it.  (sighs)

DesiVibe said:   
forbin4040 said:   Best Plan, go to Carmax, get an estimate of it's value. If you don't like it then Craigslist sale!
  
Carnax will offer the low end of auction value. Carmax is always a bad idea to sell unless you dont have the time or dont want to make an effort.

  
Carmax offers a wide range of prices in my experience. I've gotten 7-8 cars estimated by them and sold them 3. For stuff they can quickly recondition and sell (e.g. Toyota Corolla with moderate mileage) I've received very competitive offers. Combined with the zero hassle and no risk of various shady things, it can often be a good option.

You can usually squeeze anywhere from couple hundred to several thousand more if you put the legwork in. Know what its worth and if its a vehicle they want (like above) or don't (2001 Hummer H1 in pink).

jmcgonigal said:   Actually went to CarMax today. They offered the 22.5k, payoff amount is 21k so I can get a clean break from it. I got a good deal on the truck so I've never been upside down and that's with no down payment.
  
There are lots of car dealerships that offer to buy vehicles for $300-500 more than whatever Carmax offers. You just need to bring them your Carmax offer. If you can't sell it on Craigslist for more than $23K, search for dealerships in your area offering to beat Carmax offers. I'm in Houston, and there are a few that guarantee they'll beat Carmax by $500.

Dump the car and pick up something in the $7-10k price range. Generally a sweet spot for quality over price.

Then refinance that 4.25% mortgage before rates go up.

Try to sell the car through Craigslist, Cars.com, Autotrader.com. Based on your current rate it might not be beneficial to refinance because the rates have been going up for the last few months. But depending on the term (30yr fixed to 15yr fixed) you might still be able to save. If not pay extra on the mortgage monthly, and/or make an extra payment when you receive tax refund.

It is really sweet and heart warming to hear, especially young couple come on the air and say they are debt free..

If you broke even on the car, and then buy a 10k car (lets say financed as you probably want some cash in the bank for emergencies), how much savings a month will you have between your old payments and new payments?  How old is your old car?  The delta between old and new payments can go into savings or against your mortgage.  
Have you considered refinancing and what current rates are, and if so, you can talk with different banks and negotiate closing costs.

Selling on CL might net you a couple extra thousands that you can use toward new vehicle.  

Also, I would budget repairs/maintenance on a used car in the $4k-$5k range.  
There will be repairs as 1. you don't know how car was driven in the past, and 2. age starts begetting repairs.  

jmcgonigal said:   I've been listening a bit to Dave Ramsey and doing more with my money. The idea of selling my current vehicle and buying something cheaper is often brought up in his material. I'm looking for thoughts on if it's the right move.

Currently :

Vehicle loan 21k @ 2.25%
Vehicle worth 22.5k
10k liquid assets
7k mutual funds
~15k retirement funds outside of pension
168k mortgage @ 4.25%
~50k yearly salary

Would selling the vehicle and buying something with the 10k make sense? I'd be car payment free and able to save ~$400 month into retirement accounts. Or would you keep the current vehicle and invest the 10k over the next 2 years and put towards bringing down mortgage principal?

Anything info I'm leaving out?

  Why not refinance your mortgage to get lower rate under 3.25% that's easy 1.5k+ for few years

Since nobody asked, why do you need a truck?
Go with cheaper and low TCO car, a truck is expensive in long run.

Get rid of the car and get a good rebuilt one. I got a Ford Fusion 2010 with 17,000 miles on it in Janurary that was wrecked in the rear and repaired for $8500 off of Fleabay. It is going to last me a long time without any payments.

stay aWAY from craigslist if you value your life,,or just take a few armed guards with you when you do use it...

driveshift.com
beepi.com

i used beepi to sell my car and it was a good experience they made $900 off the sale as the middle man but also had to fix a nasty scratch on the tailgate before delivering it to the new owner and it was done in a few days.

Buy the car you can afford with cash.

If you use cash to buy the car, you may not have any more liquid cash. Anyone else notice this? What happens if there is an emergency? They usually say have 6 months of reserve for expenses. Maybe wait a while and pay down your car loan a bit first, then with the equity use it to buy your next car. Cash is king.

mokiavelli said:   If you use cash to buy the car, you may not have any more liquid cash. Anyone else notice this? What happens if there is an emergency? They usually say have 6 months of reserve for expenses. Maybe wait a while and pay down your car loan a bit first, then with the equity use it to buy your next car. Cash is king.
  When I say "afford" with cash, that means you're not spending every last penny you have. If you don't have a 6 month emergency fund, you should be looking at very cheap cars. Like $500. Or taking the bus for a while.

Chargum85 said:   Dump the car and pick up something in the $7-10k price range. Generally a sweet spot for quality over price.

Then refinance that 4.25% mortgage before rates go up.

Agreed. I'm not a fan of either of those loan rates. Refinancing the mortgage will net way more savings than selling the car and buying a cheaper one.

DealsBrokeMe said:   Since nobody asked, why do you need a truck?
Go with cheaper and low TCO car, a truck is expensive in long run.

  
Why do you think it is a truck?

Qzic said:   
DealsBrokeMe said:   Since nobody asked, why do you need a truck?
Go with cheaper and low TCO car, a truck is expensive in long run.

  
Why do you think it is a truck?

  Because:
jmcgonigal said:   I got a good deal on the truck so I've never been upside down and that's with no down payment.
  

BostonOne said:   I would get rid of the car, buy a good used car for $4-5K and still have $5-6K of liquid assets.

Generally, the FWF crowd would never recommend someone making $50K spending over $20K on a car.


 "buy a good used car for $4-5K"
What cars would fall into this parameter? You could easily end up with many problems, high mileage vehicles, etc. in this price range...  

Here are a couple of hundred cars on eBay between $4K & $5K and under 100K miles.

eBay Motors - $4-5K cars under 100K miles

Do you mean pickup truck or something else? If it's a pickup I'd keep it. It has utility beyond personal transportation. Make dump hauls for people on the weekends or something else like that and you'll easy make the truck payment up.

jarfykk said:   
DesiVibe said:   
forbin4040 said:   Best Plan, go to Carmax, get an estimate of it's value. If you don't like it then Craigslist sale!
  
Carnax will offer the low end of auction value. Carmax is always a bad idea to sell unless you dont have the time or dont want to make an effort.

  
Carmax offers a wide range of prices in my experience. I've gotten 7-8 cars estimated by them and sold them 3. For stuff they can quickly recondition and sell (e.g. Toyota Corolla with moderate mileage) I've received very competitive offers. Combined with the zero hassle and no risk of various shady things, it can often be a good option.

You can usually squeeze anywhere from couple hundred to several thousand more if you put the legwork in. Know what its worth and if its a vehicle they want (like above) or don't (2001 Hummer H1 in pink).

  My only CarMax experience they offered me very near KBB "excellent" on a car with electrical problems and bodywork that they didn't find in their inspection.  Its a crapshoot, takes like 30 minutes, nothing to lose.

Why would you buy a car so old? I would not put my kids in most of these cars. Also, around 5 years or 70-80K they will all start breaking down on you so not so cheap anyway.

Keep your truck if you are enjoying it, and adjust your lifestyle if necessary.

I disagree with the mentality of most replies, why drive a crappy car or take the bus to save a few thousand dollars for retirement? Many of us will not make it past 70 or 80.
There is a 50% chance to make to 80 and 70% chance to make it 70%.

Better to drive crappy car when you get old... most probably you will be driven then...

To answer a few of the questions. The reason for a truck was two fold. The home I purchased needed a complete renovation. With that included getting supplies weekly from local stores, furniture, dump runs etc etc. The second reason is that my job is classified as emergency essential. If it snows etc I still have to make it in. Thus the reason I went with a pickup. 

I have looked into autotrader etc and believe I may be able to squeeze out another 1k or so of the vehicle. This is ultimately what I am leaning towards. 

As far as the mortgage. This is something I have been researching, but it appears I've stalled to long and missed my opportunity. I currently have a USDA loan at 4.25% and includes ~$700/year guarantee fee. At purchase I had an LTV of 84%, currently I believe I'm at around 78%. I wanted to refinance to get rid of the guarantee fee as well as lower interest rate. However it appears that my interest rate is currently on par with what's being offered for a 30yr fixed. 

jaytrader said:   If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.
  Or take it to a decent sized dealer and see what low end inventory they have.  If theyve been sitting on it for a while, or are shipping it off to auction anyways, or they see your car as being more marketable (or they really screwed whoever they got it from), you may be able to trade nearly straight-up, with you kicking in relatively little (<$5k) extra cash

Glitch99 said:   
jaytrader said:   If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.
  Or take it to a decent sized dealer and see what low end inventory they have.  If theyve been sitting on it for a while, or are shipping it off to auction anyways, or they see your car as being more marketable (or they really screwed whoever they got it from), you may be able to trade nearly straight-up, with you kicking in relatively little (<$5k) extra cash

  Kicking in up to 25% of a vehicle's value is "relatively little?"

jmcgonigal said:   To answer a few of the questions. The reason for a truck was two fold. The home I purchased needed a complete renovation. With that included getting supplies weekly from local stores, furniture, dump runs etc etc. The second reason is that my job is classified as emergency essential. If it snows etc I still have to make it in. Thus the reason I went with a pickup. 

.... 

Given this info I'd definitely keep the truck. Add to my post above, besides dump runs, you also could do Handy-man type stuff on your days off to earn enough for the truck payment. If someone wants examples of your work, show them your own home.

jaytrader said:   
Glitch99 said:   
jaytrader said:   If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.
  Or take it to a decent sized dealer and see what low end inventory they have.  If theyve been sitting on it for a while, or are shipping it off to auction anyways, or they see your car as being more marketable (or they really screwed whoever they got it from), you may be able to trade nearly straight-up, with you kicking in relatively little (<$5k) extra cash

  Kicking in up to 25% of a vehicle's value is "relatively little?"

  You really expect his trade-in will cover over 75% of the price of the new car he buys?

jmcgonigal said:   To answer a few of the questions. The reason for a truck was two fold. The home I purchased needed a complete renovation. With that included getting supplies weekly from local stores, furniture, dump runs etc etc. The second reason is that my job is classified as emergency essential. If it snows etc I still have to make it in. Thus the reason I went with a pickup.
 

  
When I was in your shoes in 2012, (not an emergency worker, but expected to commute 75 miles a day when schools are closed) I bought an AWD Mercedes wagon, cost me all of $3k.
Leather interior was absolutely mint condition when I bought it, but not a year later. It's sad what I did to the inside of that car, but at least I didn't pay $30k for it.

Glitch99 said:   
jaytrader said:   
Glitch99 said:   
jaytrader said:   If Carmax offered $22,500, you may be able to squeeze an extra couple grand out of a Craigslist sale if you're willing to deal with all that. Don't just take Carmax's offer because it'll allow a clean break from the debt. Make sure you're doing all of this for the right reasons. It sounds like the reasons are for financial gain, not because of financial hardship. If that's the case, why not at least post it on Craigslist for a week to see if you get any hits? Post it up at $25k or something, and be willing to accept anything over $22,500 (within reason). I would do it if I could make an extra $1k or more.
  Or take it to a decent sized dealer and see what low end inventory they have.  If theyve been sitting on it for a while, or are shipping it off to auction anyways, or they see your car as being more marketable (or they really screwed whoever they got it from), you may be able to trade nearly straight-up, with you kicking in relatively little (<$5k) extra cash

  Kicking in up to 25% of a vehicle's value is "relatively little?"

  You really expect his trade-in will cover over 75% of the price of the new car he buys?

  Trading in is rarely the FWF way, friend. 

Glitch99 said:     You really expect his trade-in will cover over 75% of the price of the new car he buys?
  
If the purpose of trading-in is to down size the car, it needs to cover well over 200% of the price of the new car.  The conversation up to this point is that his current car should cost 200% - 400% of the value of the new car.

Specifically people are suggesting he sell his $20k truck and buy either a $4k-5k car or a $8-$10k (depending on responder).  You are suggesting he upgrade his relatively new truck and sell it for $20k and buy a new $25k vehicle.  

taxmantoo said:   
jmcgonigal said:   To answer a few of the questions. The reason for a truck was two fold. The home I purchased needed a complete renovation. With that included getting supplies weekly from local stores, furniture, dump runs etc etc. The second reason is that my job is classified as emergency essential. If it snows etc I still have to make it in. Thus the reason I went with a pickup.
  
When I was in your shoes in 2012, (not an emergency worker, but expected to commute 75 miles a day when schools are closed) I bought an AWD Mercedes wagon, cost me all of $3k.
Leather interior was absolutely mint condition when I bought it, but not a year later. It's sad what I did to the inside of that car, but at least I didn't pay $30k for it.

  Sounds like quite the story. Was it like a scene from Pulp Fiction?

Qzic said:   
Glitch99 said:     You really expect his trade-in will cover over 75% of the price of the new car he buys?
  
If the purpose of trading-in is to down size the car, it needs to cover well over 200% of the price of the new car.  The conversation up to this point is that his current car should cost 200% - 400% of the value of the new car.

Specifically people are suggesting he sell his $20k truck and buy either a $4k-5k car or a $8-$10k (depending on responder).  You are suggesting he upgrade his relatively new truck and sell it for $20k and buy a new $25k vehicle.  

  That isn't at all what I'm suggesting.  I'm suggesting that if he finds the right deal, trading in his car at the dealer could cover a good chunk of the cost of his $7-10k replacement car.  Trading in isn't always a bad deal, especially when trading down - dealers may be willing to break even, if not take a loss, if you are giving them a more marketable vehicle and taking one that's been sitting around a while.

I have no clue how you could possibly come up with a $25k new car?  Selling his truck and buying something for $25k would require him kick in over $20,000 cash.

Skipping 6 Messages...
Not sure if you're still considering it or not, but I'll throw in my two cents. If you drive long distances, I would downsize your vehicle (either clist or carmax given the offer they gave you). Trucks usually get ~16 mpg. You can get cheap new cars (I'd buy used, but still) for $12k that get 40mpg. Just get one of those used for ~$6k with 60k miles on it and you should save a fortune in gas. I drive an old suburban, but my commute to work is 6 miles roundtrip. I know some people making $60k a year that spend $10k on gas each year :/
Quick math....
40 miles one way to work 5 days a week:
80 miles per day x 5 days a week = 400 miles.
400 miles / 16mpg = 25 gal of gas
25 gal of gas x $2.25 = $56.25 per week
$56.25/week x 50 weeks a year = $2,812

Figure you get a car that averages 32 mpg (eg, 2012 Chevy Cruze) and you'll save $1,400 a year in gas (plus insurance, property taxes, and your big note payment). I'd definitely change.
Anyway, hope that helps,
~Ryan



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