Financed a 38K truck with a 10K down payment at 3.44%. Currently have 24K left on it. Gas isn’t getting any cheaper and have no use for a 4WD truck where I live. Plus insurance could be lower.

Been looking into a 28K car that is way more fuel efficient. I’m financed through USAA, how does trading in work and should I be looking into getting something cheaper? A lower car payment wouldn’t hurt.

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nkyguy1988 t1_je8btf6 wrote on March 30, 2023 at 3:29 AM

Trading a car in is effectively selling to a dealer. How much is the truck worth today? Keep in mind you don't trade in at retail.

NaoMaoi OP t1_je8bwzr wrote on March 30, 2023 at 3:30 AM

CarMax and Carvana both offered 31K as is for a trade in.

nkyguy1988 t1_je8c2ah wrote on March 30, 2023 at 3:32 AM

Assuming you take their deals they will pay off the financing and that leaves you with about 7k for a down payment on something else.

NaoMaoi OP t1_je8c8it wrote on March 30, 2023 at 3:33 AM

Awesome. Exactly what I was curious about regarding the left over money.

nkyguy1988 t1_je8co5r wrote on March 30, 2023 at 3:37 AM

Also keep in mind that unless you are buying a new model with manufacturer incentive financing, you will not find a 3.4% rate. In fact, short of having that promo, a good car rate is about 6%, maybe 5.x% if you look hard enough.

[deleted] t1_je8bxpq wrote on March 30, 2023 at 3:30 AM

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NaoMaoi OP t1_je8c2ib wrote on March 30, 2023 at 3:32 AM

So would you recommend waiting 6 or so months? I’m in no rush for this.

[deleted] t1_je8ctgz wrote on March 30, 2023 at 3:38 AM

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PersephNoob t1_je8c2tb wrote on March 30, 2023 at 3:32 AM

The purpose of trading in is for the simplicity. But just compare selling prices for trade in vs private sale and if its a great amount just private sell it, pay off the loan and go get your car. I will say in my experience I don’t see much difference between a 14k car and a 28k car so food for thought.

Superb_Feature_8966 t1_je8erjj wrote on March 30, 2023 at 3:57 AM

It's a bad time to be taking on any new loans. The used car market is one of them. You will end up with a lesser vehicle with higher interest rate. That will cost more than the gas would. Just picture what you will end up with for the down payment and the price you have picked for the new car and call your bank. They will run the numbers and tell you what rate you would be looking at. It probably will not be 3.44

zoiddirkoid t1_je8ew1a wrote on March 30, 2023 at 3:58 AM

I don't think it's wise to trade down just to save gas unless you have a brutal commute and very high fuel costs.

You owe 24k which isn't too bad. Better off paying that down versus buying another car and paying taxes and almost doubling your interst rate.

How much do you drive per month?

turnipham t1_je9ury0 wrote on March 30, 2023 at 1:51 PM

I personally wouldn't do it based purely on financials. Every time you go to dealership or make a transaction there's a lot of financial 'friction'. The dealer has to make a profit so they sell at a bit higher and buy at a bit lower. And you have to pay for taxes, dealer fees, doc fees, pre purchase inspections, etc... If you add all of that up, it adds up.

From a purely financial perspective I make as few car transactions as possible. It's a different story if you just don't like your current car or whatever. But purely from dollars perspective I wouldn't