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View Full Version : OT: paying off a car...don't know what to do!


marcyinPA
06-18-2006, 07:05 PM
A little background first. We have one car. It's a 2003 Hyundai Elantra. My Dh has a company van that he uses for work. My boys are getting bigger (11 and 7) and we also have a dog. The Elantra, although a good little car, is too small for us now, and we really would like a minivan. We've been looking at used, and we want to keep our payments under $200, but we want something not too old (like 3 years is fine) and lower mileage.

Back to the Elantra. We owe $4600 on it, and the trade-in value on it is about $5500. I've read that if I trade it, I should have the title free and clear, so I'm assuming that that means I should pay it off in advance. We have about $9000 in our savings account, so technically, I can pay off the car, have possession of the title, and then trade it in for a minivan (and hope that they give me close to blue book value on it). In the meantime, until we found a van that we want, I'd bank the current $189 car payment into savings every month.

My worry is that my savings account will be pretty low. I'm uncomfortable with it being that low. We have not been depositing into it regularly, although we will be in the Fall because I've landed a part-time teaching job and will be able to save a little (won't be getting paid much...under $100 a week)

The pro to this scenario is when we DO find a van, the entire trade amount will be applied to the price of the van, right? That will make our payments on the van pretty low, and I could possibly take a loan for 48 months instead of 60.

I'm not sure if I exactly have a question here or not. :confused3 I guess I'm looking for some reassurance or advice on how to do this. Thanks for any input!

NikiM20
06-18-2006, 07:53 PM
I would look at the interest rate on both...if your saving acct is getting 3% but youre paying 7% on the car I would pay it off, but you can still trade in the car with it still financed, people do it all the time, just dont let them give you less $ than its worth so you dont start off upside down . HTH

Helene
06-18-2006, 08:51 PM
I would not drain down my cash in the bank to pay off a vehicle in your situation. With each passing month, your car is depreciating a little. When your're ready to buy the van, you can negotiate your price and get the equity you have applied to the new loan. Once a price is set for the new van, you can then withdraw $$ for an additional down payment to bring your payments where you want them to be.

The only way I would pay it off would be if you planned on keeping the vehicle for awhile and wanted to simply pay off the debt.

HTH

Carrie Ellis
06-18-2006, 10:48 PM
Take it to carmax and see what they will give you for it. After they make the offer you have a week or 200-300 miles (can't remember which) to take the offer. Then if you sell it to carmax you will not have to play that crazy number game with the dealer if should decide to buy a minivan. Or if you want to see what the dealer will give you then you can not say anything about trading your car in until the end. Then once your amount is set on the minivan aske them what they will give you for your car. If it is less than carmax then just tell them no and drive it over to carmax. If it is better then trade it in! You just need to do that with in the week of your offer from Carmax. If you did sell it to carmax then you could look for a used van with a private seller instead of a dealership.

tinatark
06-19-2006, 12:25 AM
Are you buying the van from a dealership? The trade value of the car will lower the sales tax you pay on the new car. It may be worth it to trade instead of sell.

I wouldn't pay it off - whether you are trading or selling it - when you do either of those, the new owners will pay off your lien!

Chicago526
06-19-2006, 10:02 AM
Personally, I'd try my best to buy a van outright and not have a payment at all. If you can buy a minivan out-right for $9,000, you won't have a car loan at all. You can bank what you would have had in a car payment. You may have to settle for a slightly older model and/or high miles, but cars today last much longer with fewer problems than at any point in history, so buying an older model/higher miles vehical isn't the risk it used to be. You'll have to shop more carefully and it may take you longer to find just the right van, but it would be worth in the end. Imagine life with no car payment AND a decent amount of money in the bank!

Edited to add: I just looked at Carmax.com and in my area, I found a 2001 Ford Windstar, 2001 with 77K for $9,559. I'd think you should be able to find something in your area for about the same. Check it out! :)