In 2022 my car (a 2010 Nissan Versa) kicked the bucket. The engine was broken and needed to be replaced. Rather than spending even MORE money on repairs (I had spent a few thousand or so on various other parts at this point), I decided to buy a newer car that would, presumably, require fewer repairs in the short term.
I bought a 2021 Honda HRV for ~$20,000 at 7.59% APR. I pay $414 a month and have $16k left on it. I bought this car under the worst possible circumstances:
- Used car prices were very high at this time
- Interest rates were high due to inflation
- I needed a car because my previous one had died so I didn’t have the luxury of time
My hope, at the time, was that inflation would be tamed and interest rates would eventually be lowered, wherein I could refinance the loan. I no longer believe this is a possibility within the next 4 years or so. I was also hoping to find something small and cheap like a Honda fit, but I learned that they had stopped producing them. An HRV seemed like a sensible kind of car given the modest physical needs of how I used a car at the time
So, here’s my question: Should I just sell my car for something older? Maybe like a 2015 or so? Or should I just stick with my current machine until it’s paid off and try to refinance after 2028?
If I could go back in time, I would’ve sold the Versa in 2020 or so, before I had spent a bunch of money on repairs. Hindsight is 20/20 though
Are you happy with the car? How are current car interest rates? Some banks/credit unions here offer a discounted refi rate to new customers. Could you do something like that?
The car runs fine, I don’t have any major complaints other than the stupid ass touch screen controls for stuff like air conditioning, but it seems hard to find any car that has real controls anymore.
I also moved to a city (from the suburbs) and work remotely so I don’t drive as much as I used to
I don’t know what current car interest rates are. I can tell you that the federal reserve has not changed interest rates in a meaningful way since then
One thing I did when I lived in the city was get a Zipcar membership.
I didn’t own a car but it was a very cheap and convenient way to drive one when I needed to, and some were parked on my street.
Some insurance companies have a discount or a lower pricing tier for low miles driven per day.
Have you looked at the blue book price you could get for it vs your loan payoff amount? If the blue book price is lower, you’re upside down and should prioritize paying more per month. This gets it paid off quicker for less interest and then you have a solid paid off car that you could probably put 200-300k miles on.
Do you have a 401k and the ability to take a loan from it? You could refinance the loan using your 401k to get a lower rate, and then you’re paying yourself interest. The catch here is being willing to stay at the employer until the loan is paid off. If you left employment before the loan is paid off, it could become a deemed distribution with a 20% early withdrawal penalty on top of regular taxes owed on the distribution. I normally don’t advise getting a 401k loan because of risk of triggering that distribution, but there are circumstances where it could be advantageous. Your HR dept and/or plan advisor can help you out there.