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
You haven’t mentioned why you want to sell. I’m assuming you still need a car.
You bought a nearly new car. It’s expected to be reliable, not a luxury model, and have low maintenance costs.
You should prioritize paying off the loan faster if possible.
I figured I could balance some of the other factors (low maintenance cost, higher principle, higher interest) against each other to get a lower monthly payment
Your car has a kbb value of around $19k
What can you buy for $3k?
By that interest rate I’m assuming they are paying gap insurance and had low or non existent down payment. if OP bought a used subcompact for $12k with the $3K down they would likely have a lower rate and a much lower monthly payment. Probably 25-30% lower. The current interest rates aren’t killing OP it’s their credit and down payment amount.
So the question, then, is what’s the cheapest car you can own?
There’s a guy that suggested a bike, so you might want to add requirements about how many passengers you need to fit and what roads you need to be able to use. That being said, I looked around for an analysis of basically this, and had a lot of trouble cutting through the semi-commercial stuff selling new cars or old junkers separately, but found something. It basically suggests a nearly new and fuel-efficient car that’s hardy enough you can resell it in several years for not too much less, which might be what you have without actually checking. If you’re driving more or less that might change the analysis a bit.
I know from my own searches early (like 2000’s even) electrics can be a steal if you’re alright with tiny range. Electrics almost don’t have a maintenance cost and the ancient ones can be comparable in price to other used vehicles, because of the high depreciation mentioned in that source.