[Ying]

From my conversations with people and a little bit of reading, I've come to the conclusion that there are two schools of thought when taking on car debt.


One is to drive the car until the value is right around what you could sell it for to pay the loan off and have a nice downpayment on a new car. Now that value obviously goes up or down depending on what type of car you're looking at getting into next. These are the types that like keeping the car fresh, looking for something different, and assume that they will likely always keep a similar monthly payment for the duration. Fluctuations occur here as well due to interest rates, raises, inflation, yada yada yada.

The other is to drive the car until it's paid off and get whatever value's left over at the end of the car's life. Once again, a bunch of factors contributing to trade-in value, etc. These are the types that like not having to make car payments and return to the car buying cycle when "it's time."

I've seen articles that say that real savings go to those who run a car into the ground, but I haven't seen astonishing figures to warrant one way or the other.

My question is what type are you and why? Sure there are variations, but generally people stick to one or the other.

And a question for you people that pay a car off completely... Are you really not making car payments? Do you just assume keep putting that same amount in a savings account to build up a down payment on a new car and for service when something breaks?

Opinons please.

 

[SD_GR]

If you don't own the car, do what needs to be done to own the car.
Once you own the car, drive it until the wheels fall off.

 

[Micah]

363.18 + 567.30 = car payments

I don't get upside down on cars. That's my MO.

If I buy new, I check and make sure the car has a good residual value. This is the same thing you should do when leasing to make sure you get a good deal. Reason I do this is so that with a few extra payments every now and again, I will be able to trade the car in for what I owe. This doesn't mean I intend to get rid of the car, I simply would like to have the option available without taking a severe financial beating.

http://www.cars.com/go/alg/index.jsp - you can use that to check a cars residual value.

If I buy used, I try to research every bit of information I can, aftermarket parts, people who have broken things, TSB's, mostly forum searching. I read up on my WRX for quite a while before I bought it.

In the state of NJ, it is illegal for penalties to be charged on early payment of a loan. So I usually don't put much more than a grand or two down when buying a car. I make the occasional extra payment, but mostly I just keep money in the bank. Credit is good, but cash on hand is divine. Taking out large loans and paying them off won't hurt your credit.

When making extra payments, call ahead and ask if there are any special things they would like you to write on the check. Most of the time they like "Principle only" written in the memo field along with the account number. Paying down the principle owed will also help lower the amount of interest charged over time.

Also, all of this is just what I've done in the past, and what I plan to do in the future. I highly doubt it's the best option, I'm no millionaire. It's the best thing I've found that works for me so far, if I learn of something better... I'll adapt.

 

[gil]

I don't get upside down on cars. That's my MO.

If I buy new, I check and make sure the car has a good residual value. This is the same thing you should do when leasing to make sure you get a good deal. Reason I do this is so that with a few extra payments every now and again, I will be able to trade the car in for what I owe. This doesn't mean I intend to get rid of the car, I simply would like to have the option available without taking a severe financial beating.

http://www.cars.com/go/alg/index.jsp - you can use that to check a cars residual value.

If I buy used, I try to research every bit of information I can, aftermarket parts, people who have broken things, TSB's, mostly forum searching. I read up on my WRX for quite a while before I bought it.

In the state of NJ, it is illegal for penalties to be charged on early payment of a loan. So I usually don't put much more than a grand or two down when buying a car. I make the occasional extra payment, but mostly I just keep money in the bank. Credit is good, but cash on hand is divine. Taking out large loans and paying them off won't hurt your credit.

When making extra payments, call ahead and ask if there are any special things they would like you to write on the check. Most of the time they like "Principle only" written in the memo field along with the account number. Paying down the principle owed will also help lower the amount of interest charged over time.

Also, all of this is just what I've done in the past, and what I plan to do in the future. I highly doubt it's the best option, I'm no millionaire. It's the best thing I've found that works for me so far, if I learn of something better... I'll adapt.

You seem to know what your talking about w/this stuff , so I've got a question. I am leasing an 06 wrx , my payments are 350 per month for 48 months. I am 22 months into my lease and I want an sti real bad , do you think I could possibly trade it in w/o getting raped ? (22k and in perfect cond)

 

[Micah]

You seem to know what your talking about w/this stuff , so I've got a question. I am leasing an 06 wrx , my payments are 350 per month for 48 months. I am 22 months into my lease and I want an sti real bad , do you think I could possibly trade it in w/o getting raped ? (22k and in perfect cond)

Well, technically you can't trade it in period. You may however be able to turn it in early. You've signed a lease agreement stating that you will lease the car for 48 months, I'm not sure how one goes about getting out of a lease. Talk to a car dealer and ask. I'm fairly sure they will rape you, but it never hurts to ask.

Where's that greyson subaru guy - he works at a dealership. He'd be the person on the forum to ask. In the meantime, search google with lease early termination - plenty of stuff available to be read.

 

[kiger0183]

i always buy about two years old and get a car with low mileage. I have an 05 wrx probably worth around 17k and I owe 7k on the car. I will probably keep it until I pay off the loan and drive it for a few years afterward. I just bought a house and am planning on buying a condo to rent in the next year. A car is a depreciating asset and should be treated as such. Paying off a car fast is not worth it IMO, you're $10k could be used to make you money instead of slowly losing it over time (by paying off a car loan early) - That being said, if I had a car loan at 10% i would reevaluate my strategy. (my car loan is at 4.5%)

On a side note I suggest leasing a car if you have the tendency to want to get a new one after your lease is up. That's truly the only way to do it. Buying a new car is absolutely idiotic unless you plan on keeping it for +5 years.

My $.02

 

[gil]

Thanks for your input

 

[big_sur]

there's some website up for trading leases if you wanted to get out of yours, I forgot what it was called but they were talking about it on NPR not too long ago. I'm sure you could google it and there's probably ten sites up like it now so that's one way to go.

As for me, I drive cars into the ground but it really doesn't take all that long when you drive 24+k a year. I usually just buy them cash so I can get them cheaper and then make a car payment to myself to buy the next one while I'm running the current one into the ground. I like having the flexibility of not making a car payment if things are tight.

 

[T0rque]

I have owned 32 cars in 10 years... You guess which one I am :rotfl: