Looking to purchase a second vehicle, have finance question

[MBony]

We (my wife and I) have Ford Escape with a balance in my name and a Chevy Silverado paid off. We are looking at trading the truck in for a car with better gas mileage.

What I would like to know is if there is any advantage to paying off the Escape and have a higher payment on the 2nd vehicle or keep the payment on the Escape and have a lower payment on the 2nd vehicle. Assume that in both cases the amount in total payments is relatively the same each month.

 

[rcpratt]

Depends on the rate you financed the Escape at and what rate you can get on the new vehicle.

 

[MBony]

Depends on the rate you financed the Escape at and what rate you can get on the new vehicle.

We have a balance on the <$5000 on the Escape with about 7.25% (I know that isn't great). The dealership is saying they can get me around 4%, but I'm expecting around 5-6% when the dust settles.

 

[rcpratt]

Pay off the Escape if the rate is higher and you have the cash. This is assuming you're not giving up some other cash incentive to get whatever rate you're getting on your new vehicle.

 

[BoomerD]

You will probably get far more for your truck if you sell it privately than if you trade it in at a dealership.
It's more headaches, but the difference can be significant.

 

[CPA]

As BoomerD stated the only material advantage on a car with that amount remaining on it, would be the ability to sell it privately, which you should get more money for it than trading it in.