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 must log in or register to comment.
Your payments are not terrible for today’s car market, and you have a practical, late model car. It doesn’t seem like you will come out ahead on getting a different car because of the transaction costs associated (registration, etc).
If you don’t drive it, it will depreciate slower and when and if it no longer meets your needs you will get more for it. You could probably get an older model for cheaper, but it will inevitably need work and you roll the dice with being stuck with an expensive repair.
You could also lease an electric car with the stupid low lease prices they are offering, but then you are still on the hook for expensive insurance and are in a worse position in three years.
Dump any extra you have into extra payments on the car for an easy 7% ROI, and use it to get groceries once a week.
deleted by creator
They didn’t stop producing Fits, they just stopped importing them to the US because Americans are absolutely stupid and when gas prices dropped during COVID the goldfish memory having public bought lots of trucks and SUVs. I hate this shit hole.
I absolutely love my Honda Fit. Best car I’ve had, even drove internationally with it.
But yeah, the US basically gave up on compacts. Everything on the road nowadays is either a fucking gas guzzling SUV or a swasticar
Start shopping for subcompacts sold by rental companies like Hertz. They have strict maintenance schedules. As long as you can trust yourself to inspect a car for abuse you should be able to get a good deal and lower your payment by quite a bit. That would give you headroom to save for repairs. They sell used Honda Fits. It would also lower your gas costs.
This is exactly why an automobile should be treated as a depreciating asset, rather than an investment.
You fix a car if it will cost less than half of its value at the time of the repair. If it cost more than half, get rid of it at the first opportunity. There are caveats to that rule of course. So don’t fault yourself for buying another car.
You had some bad luck and that is just a part of owning a car. In commiseration, I invested $2500 into an Acura TL that I dearly loved for timing belt and some other 100K maintenance items. Only to have its transmission blow up less than 4 months later. The $2500, plus the transmission replacement would have been well over half the value of the car. I traded it. For a car that I still own and absolutely loathe, but it’s been reliable and I’ve put over 160,000 miles on it. My oldest kid now drives it.
The short answer is:
Keep your current car. It’s basically new. From a manufacturer that is notable for the reliability of its products. You also know its maintenance history, which is incredibly important.
Have your payments kept ahead of depreciation? Meaning, can you sell your car for enough to pay off your loan? Just so you know, that’s almost always “no”, but your results may vary. You would also be forced to buy another car. 7.59% APR sucks, but are you able to get a better rate now on another car? Do you have the down payment for another car? Again, you may not have any money left over from selling your current car and paying off the lien.
If you can refinance it at a lower the rate, then absolutely that is the path you should take. If not, then taking a more global look at your finances are in order to make the payment more palatable.
If it cost more than half, get rid of it at the first opportunity.
I don’t think this part is really right. Buy a newer car because you want a newer car (and can afford it) or because your old car can’t do the job you need anymore. Newer car is almost never going to save you money.
If you have an old paid-off car that is worth basically nothing on paper but in good shape and runs well for you, and it needs a repair, it’s almost always going to be cheaper to do the repair.
If you get a more expensive car from a dealer (new or used) the car payments and interest are so much higher than even ongoing frequent repair costs it’s just crazy.
Even in OPs story replacing the engine — I don’t know what else was wrong with it — but if they put $6K into a new engine and next year $1K into brakes and next year $1K into tires that’s still way less money than just three years of interest payments on a nice new CRV. That’s not even counting the down payment and the principal!!
You might have lots of reasons besides money to replace a car, but that’s a question whether the cost is worth it, not a question of whether it’s cheaper
The place in my mind when the old car is no longer economical to repair is when:
-
The repair can’t really fix it eg the body is rusting away etc. Car is done unless you rebuild the whole thing, too bad time to say goodbye
-
frequent breakdowns, even small cheap easily fixed breakdowns, mean you can’t get to work and lose money or risk your job (consider if the breakdowns are related cause though — maybe you need to replace all old rotted rubber hoses and exposed gaskets in the car all at once and it will be reliable again? Making an unreliable car become reliable again requires you or somebody you trust knows something about cars to decide; most people can’t do this)
-
the repair (including rental car or lost work due to downtime, which can be more than the actual mechanic cost but totally counts just the same as a cost to you) is more than the cost of whatever vehicle you’re going to replace it with — this… mostly doesn’t happen. putting $6K repair plus $800 for two weeks’ car rental into replacing the engine on a otherwise-$10K old Versa is still cheaper even than buying somebody else’s $10K old Versa in running condition (by $2200 + tax + registration) — let alone a newer car.
The other situation is safety. If you are driving a '95, and you have a baby or something, moving to an '08 gets you a lots of advancement in safety and you cannot pay to replace the people you care about.
-
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.
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.
One of your implied questions is, “Can I get a reliable vehicle from around 2015 and spend less than $414 monthly, combined, on loan interest and repairs?”
To which I say, “probably”. I’ve bought cars that meet those requirements, for my definition of “reliable”. But your needs may vary.
I will say, financing a car is among the top unnecessary “stupid taxes” that I have paid, in hindsight.
Now that I don’t have car payments, I’ve found that ~$414 per month chucked into a savings account can buy a surprisingly decent car surprisingly quickly.
And having no car payment feels like I imagine having a rich uncle must feel like.
Probably better to just keep it. Probably.
Interest rates haven’t changed much since 2021 (they may even be higher?). Unless your credit score has massively improved to potentially secure a lower rate on a new finance, it’s probably not going to be any better than the 7.59 you have now.
Do you think you could sell your HRV for $16,000 in a private sale? Even at that, you’d be breaking even with the payoff, and the replacement would be 100% out of pocket (or a new finance at whatever current rates are).
Do you have your eye on something already as a replacement? If so, how much would it cost? Do you think you could tack that amount (or part of it) on to the $16K sale price of your HRV to help pay for it?
Ultimately, those are only things you can answer. I’m more of a play it safe /devil you know person, so I would probably just stick with it but pay extra on principal to help pay it down quicker and reduce interest on the loan.
MoneyGuy has a great rule, 20/3/8. 20% down for no more than a 3 year loan term (36 months), with monthly payment being no more than 8% monthly gross. You could try to refinance with these in mind and see if you qualify, $16k left isn’t a terrible position, but it depends on what the value of the vehicle currently is. If you’re under water on it, you might have a difficult time refinancing in a worthwhile way.
Step 1. Sell dumb car for ~15k(?)
Step 2. Buy one of the best cargo bikes on the planet for 6k (get disc brakes)
Step 3. ???
Step 4. Profit
This is highly dependent on where OP lives and what OP needs to do with it. Assuming they’re in North America, If they’re rural, forget about it. If they have a big family it’s a hell of a swing at the very least. If they have a long commute and can’t get out of it or just use a bus it’s also not going to work.
Rebuilding civilisation to not be car-centric probably isn’t in their budget.
And unfortunately a lot of lower-density urban places are so poorly designed that a cargo bike would be impractical or dangerous.
Of course the more bike infrastructure that gets built, the more people will be able to actually buy groceries and bike home / ferry kids to school, etc.
Still would like to see a solution for rainy weather but the Dutch survive so that must not be a huge issue.
