Positive equity on my vehicle - Dealer wants to buyback and put me in a newer modelm but I'm tossed.

Submitted by CarbonPrinted t3_126wyi8 in personalfinance

Hey there PF- I currently own a 2015 Honda CR-V, purchased in 2018 at 42,000 miles for $17,500. I didn't have much for the down payment, so the loan was taken out for $16,500 at 6.4%. In 2020 I refinanced the remaining $13,000 at 4.2%.

The dealership I bought it through is now looking to buyback the car and wants to sell me a newer model. Their offer comes as follows:

  • $19,000 for the current vehicle
  • Waiver of all dealer fees* (I would need more details from them on what this would entail)
  • $0 down and 2.99% APR on a 5 year loan (through the dealership)
  • Included service contract (NOT the extended warranty, but oil changes, wheel alignments, etc)

Current payment details:

  • $7000 remaining
  • 4.2% interest rate on the loan
  • $306 monthly payments
  • $114/mo for insurance ($125/mo if I upgraded to a newer model)

I currently owe $7,000 on the car and it still only has ~72,000 miles on it. I feel that if I took the offer, paid off the remaining $7,000 on the loan, I'd be left with $12,000 to put towards a newer model (2022 or 2023 CR-V) with an estimated cost of $31,000, so I believe I'd be financing ~$19,000 at 2.99% over the next 5 years, which is roughly equal to the payments I am currently making. Used models in the years I'm looking for (2020+) are harder to come by, but would be the preferred option if allowed with the buy-back/trade-in.

Upgrading my vehicle is not critical, but having a vehicle is important based on my region and interests. Updated safety features and some of the newer perks are nice, such as the on-screen GPS display and Android Auto. I'm not currently concerned about thre new loan period (extending it out 5 years instead of the ~2 I have left on my current if I only made minimum payments) and am in a position where I could feasibly pay an additional $200 towards the principle every month, potentially closer to $500. I have minimal debt otherwise, except for student loan payments that are expected to start in 2025. I'm in a HCOL area with moderate access to transit, so the vehicle is more for leisure (for now) and is not used for a daily commute except for days when I need it or to get me to the transit center.

Ideally, this would be the last vehicle I purchase for the foreseeable future, I'm just unsure if it actually makes sense to take the dealership up on this offer. My current expenses are only 45% of my monthly take-home with the rest being redirected towards savings (house, retirement, emergency fund) and fun stuff (hobbies, small trips, etc). The 45% includes rent, car payment, insurance, food, gas, utilities, and essentials.

So, PF experts. Do I reasonably take the offer or drop it? Can provide more details if needed.

3

Comments

You must log in or register to comment.

theoriginalharbinger t1_jebbjzv wrote

> which is roughly equal to the payments I am currently making.

Gahhh... I die a little inside when I read this. Yeah, it's equal to the payments you're currently making, but how many months of current payments remain vs. the sixty months on the newly issued loan?

15

kbc87 t1_jebbvm5 wrote

It's not the WORST deal but the part you are missing is that while it's equal to your current payments, you're also extending your loan to 5 years compared to whatever it is now. Make sure you consider that extra money when thinking about it.

8

CarbonPrinted OP t1_jec2snf wrote

Understandable, it would add several years of payments under the new loan and cost a lot more money, but that's expected. Most my usage is leisure, which would make sense to keep it. I'm not overly concerned about the additional 3 years (5 years on the new one, but I still have 2 years on my current anyway) of payments that would need to be made and have additional funds in my current situation that would allow me to overpay towards the principle of my loan, which may not be as likely in the mid-future (~5 years out) as I anticipate larger life decisions to come into play (which would also make upgrading a car unreasonable at that time).

1

nolesrule t1_jebawo6 wrote

They are making these offers to everyone in their database in order to sell cars.

6

shipwreck17 t1_jebiih5 wrote

Meh, to me a 2015 Honda with 72k is a new car. I usually buy them between 50 and 100k. My daily is a 2008 with 185k and I autocross it. So while it does get frequent fluid changes it doesn't have an easy life. If u want a new car ok but the personal finance answer is keep your car. Upgrading is profitable for the dealer, not you.

6

radalicious123 t1_jebtmh5 wrote

Dealer wants to make a sale, and you're about to bite despite having a perfectly good nearly paid off car.

6

Crazyeyes3567 t1_jed8l80 wrote

Unless you are having problems with the current car. Pay it off and keep it until you do

2

harrisc42 t1_jecmw6v wrote

>Ideally, this would be the last vehicle I purchase for the foreseeable future

This is what literally everyone says, and then 3 years later they're back at the dealership eyeing the newest cars and all their cool features.

1

Restil t1_jecnyxq wrote

Just some notes of interest:

We are at the waning end of a unique point in history where used cars are worth far more than their typical depreciation rate would otherwise indicate they should be. This is not expected to continue. The new car will not hold its value like your current one has, but if you plan to keep it indefinitely, that's not a concern. However, any increase in your trade-in value is probably going to be offset by extras the dealer throws on the new vehicle. In the past, it wouldn't be unreasonable to negotiate $4-5K off the MSRP (although probably not that much on CRVs). That hasn't been the case the last couple years, so the numbers are probably working out more or less the same.

Something you could try, is to price out the new vehicle you want, do all the math considering trade in value, loan payoff, TT&L, cost of interest over the life of the loan, and figure out how much that would be, and then knock $3K off that total and insist to the dealer that's what it needs to be out the door or you're not interested. It's highly unlikely that they'll accept, but you might get lucky and it might make the whole transaction worth it. They're getting some amount of profit baked into this deal, so it's just a matter of how much of it they're willing to give up. It hasn't been a buyer's market for the last couple years, but the waters are a bit murkier right now. Again, probably not going to work to your benefit, but worst case you're right back where you are now, so no loss there.

1

lost_in_life_34 t1_jebd59o wrote

sold a 2010 CR-V in 2020 at around 85000 miles and got rid of it right before the big expenses hit

​

you have to do your research, check autotrader for selling prices around you

−1

wanttostayhidden t1_jeblbj2 wrote

>got rid of it right before the big expenses hit

Had an '08 Civic that I sold 2 years ago when it had 178,000 mi on it. The only non-routine maintenance thing I had to fix on that car was a $200 sensor. It made it another year before the kid I sold it two totaled it.

1

lost_in_life_34 t1_jebmhye wrote

i would have had to do the brakes again soon, then new tires and the shocks were wearing out. my AC broke once and had it fixed by pep boys

​

the high mileage routine maintenance can add up

1

CarbonPrinted OP t1_jec1erv wrote

My car before this was a 1995 Toyota Tercel that I ran up to 155k miles before buying the 2015. The maintenance on the car was becoming too much for me to take on, especially with having a salvage title (dad was a mechanic and did the rebuild + all maintenance which I definitely didn't do upkeep on when I moved...). Car ended up being given to a friend that was in a situation and he put another ~50k on it before finally calling it quits. RIP Tercel.

The CR-V is doing pretty well, but I know the brakes need to be done soon and it needs new tires, which are light fixes. $19k for a rebuy for it is pretty common in my area for it with a clean title and no damage besides regular wear. Private sales seem to be looking at $15-23k depending on all factors, but I don't want the hassle of dealing with a private sale, even if that meant potentially getting more than what the current offer is on it.

1

OneFingerIn t1_jebb2tl wrote

If you're able to make the payments without problem, I like the deal. Newer vehicle, no upkeep costs, and a lower rate.

−5

CarbonPrinted OP t1_jebbtwq wrote

This is what's also pushing on me: My current CR-V is a 2015 model, and while Honda's are typically pretty good, it's more likely that I'll have more maintenance expenses hitting sooner than later. I take good care of my car, but there's an appeal to having everything you said: newer vehicle, no upkeep costs, and the lower rate

1

shipwreck17 t1_jecf9rc wrote

Those are all nice to have but you're paying for them. Some maintaince on the older car is still much cheaper than another 5 years of payments plus interest plus higher insurance etc. Bottom line is new cars are nice but usually cost more so the financial answer is buy one when you need it. Not when u want it. You don't need one now but I think you have enough info to make an informed decision. I totally understand the appeal of the deal but this is r/personalfinance not r/Cars.

1

Sophster116 t1_jec2xyj wrote

Instead of minor repair costs you take on the most significant portion of the depreciation curve and have 5 more years of payments. It's not a financially advantageous decision spending a dollar to save a nickel, but potentially OP will have a nicer ride

1