Trading in a 1.5 year old Malibu

[Fraggable]

Back in early 07 I bought a 07 Malibu LT V6 for around $24K. That price may seem a bit high, but the dealer paid off my 01 Mustang V6 for what I owed, which was a couple thousand more than BBV so I didn't get much wiggle room on the price. I needed the car since the snow that year rendered my Mustang useless and it was time to upgrade to something cheaper on insurance and better on gas (yes, the V6 Malibu gets way better mileage even with a larger engine). It bugged me to pay $135/month on insurance + $300 car payment over $400 car payment and $88/month on insurance for a much newer and better car.

I've recently seen a lot of newer models, 08's and 09's and even some 07's that have a lot of features I'd love to have, like built-in GPS and Sync and well.. anything. My Malibu has a 1-CD radio without a Ipod hookup and no other nice features like most new cars come with now. I know what you're thinking, you could get a aftermarket headunit with most of that, but according to Crutchfield all the adapters and everything I need bring the total close to $1500 + installation for almost all of what I want.

Today I owe $18,229.11 on the Malibu and the payoff price is $18,448.45. BBV is around $12,500 as far as I can figure, and of course there's nothing wrong with it, still being under warranty. Only thing I've done to it is tint the windows... which looks awesome... I know the best value when it comes to buying cars is to buy a 1-3 year old model and drive it for 5-6 years or whenever repairs start getting expensive, and I have a little regret about buying a new car that's worth so much less than I owe. Looking at the car market now I think I see an opportunity to get out from under this negative equity. A couple of co-workers and family have recently gotten some weird deals on trade-ins, such as one who got $5600 for a Kia that had to be towed to the dealer and was worth ~$1000 - they gave them that huge trade-in value to get them to go for the new car since their sales are so horrendous these days.

I'm just wondering if this makes any sense... Like I said the negative equity bugs me - but yes I knew it would be there when I bought the car - stupid to complain about it now but I'm doing it anyway. If I can get what I owe on the car on a trade-in, does it make sense to move up to something else? I'm thinking about a Nissan Maxima/Altima now, or maybe some kind of Acura.

EDIT: Some info that may be relevant, I make 40K/year as a IT Consultant at a small business and that's up from 30K/year 12 months ago. They value me there and I'm going up fast. I currently am 24 and live with my parents but will be moving out within 12 months - I plan to buy a small house when I get married. It's important to have a nice-looking car to drive clients around in occasionally so please, no 'buy a '96 Civic and enjoy the lack of debt' replies.

 

[alpineranger]

You are spending what seems like a lot of your income on cars, and you don't _need_ a new car, you just have to decide whether it's worth it to you. I'm sure you will hear from a lot of people who personally wouldn't agree, but it is your prerogative to spend your money how you will, including on a newer car with the features you want. Just make sure you realize going in just how much it is costing you to do this (figure in the future depreciation of the car you will get over the next few years). If those features are really worth however much money it turns out to be to you, then go for it and don't listen to anyone else. My hunch is that once you see the bottom line figures, you will change your mind.

 

[Fraggable]

Thanks for the response, I know what you mean. After taxes and whatnot I'm spending $490 of my $2100/month on my car. I would not mind this number being less, but don't mind paying what I do for the car I drive considering the value to me of having it - for the job and I REALLY enjoy driving.

I've never fully understood leasing, but after reading a few guides it seems to fit my needs pretty well. I wonder if I should look into that...

If it wasn't clear before, I'm looking at buying a 05-08 used model, not starting this over with another new car.

 

[alpineranger]

Maybe your parents could use a slightly used Malibu?

I understand the importance of having a car you enjoy driving (I enjoy driving too), but the cost to do what you propose (trade in your car), will add a significant amount to that ~$500/mo. What you are suffering from right now is a lack of foresight. If you knew beforehand that you only would be keeping your car for such a short time, you could at least have gotten a car that would have had better resale value at this point than the Malibu.

I believe all this emphasis on being upside down (negative equity) on car loans is a red herring for someone who has no other debt and whose negative equity is only a few thousand dollars anyways. Don't spend even more money just to get out of this debt hole. This is a separate issue however, than spending the money you need to to get the car you really want. Honestly I don't think a maxima or altima will be any improvement over what you have now. If you are going to find a car you want, find the car you really want, maybe pay extra for something new, so that you won't wind up in this situation again a year or two down the road.

 

[Dr. Detroit]

Suck it up

If BBV is $12,500 ~ real world value is closer to $9,000 as no-one wants the previous gen Malibu's and used car values have plummetted with the percieved poor economy.

Buy yourself a $150 Garmin and leave the stock radio alone, drive the car for the next 12-months while making some extra principal payments to get your equity ratio a bit higher and then revisit you trading up 2009 labor day weekend when new-car bargains can be had.

 

[boomerang]

Originally posted by: Fmr12B
Suck it up

If BBV is $12,500 ~ real world value is closer to $9,000 as no-one wants the previous gen Malibu's and used car values have plummetted with the percieved poor economy.

Buy yourself a $150 Garmin and leave the stock radio alone, drive the car for the next 12-months while making some extra principal payments to get your equity ratio a bit higher and then revisit you trading up 2009 labor day weekend when new-car bargains can be had.

I don't necessarily agree with the figures, but I do agree with the advice. It sums up a long post I was typing. You want to get to a place where you're not rolling old cars into the new one.

 

[bruceb]

You don't even need to pay for the Garmin .. go to http://www.mygpsoffer.com/
You can get a Garmin Nuvi 200 for Free by signing up for a Discover Card
You must make a purchase or two on the card after it is activated to get the unit.

 

[Bignate603]

Originally posted by: boomerang

Originally posted by: Fmr12B
Suck it up

If BBV is $12,500 ~ real world value is closer to $9,000 as no-one wants the previous gen Malibu's and used car values have plummetted with the percieved poor economy.

Buy yourself a $150 Garmin and leave the stock radio alone, drive the car for the next 12-months while making some extra principal payments to get your equity ratio a bit higher and then revisit you trading up 2009 labor day weekend when new-car bargains can be had.

I don't necessarily agree with the figures, but I do agree with the advice. It sums up a long post I was typing. You want to get to a place where you're not rolling old cars into the new one.

Exactly. If you keep on trading in your cars with that much left on the loan you'll just end up with bigger and bigger loans on worse and worse terms. If the initial loan is for more than the value of the car banks see it as a risk (they can't repo the car and get back most of their money).

Keep the car and if it really bugs you that you don't have some features you can upgrade the stuff in your car. Buy a new stereo, buy navigation, and have a pro install it. Don't buy a new car for features that you can put in for $1k.

 

[Kroze]

I love people like you . Seeing how you are with cars, I recommend you lease instead of buying. You seem to want to change cars every few years.

 

[BUTCH1]

$1,500 sounds like a lot, you can buy an adapter to replace your factory stereo for$100-200 then install the head unit you want with Ipod hookup and a USB jack as well. If you wanted extra amps and subs + component speakers you would have to buy that for any car, even a new one. The only way to get value with most domestic sedans is to keep them for a long time, trading in a 2 year old domestic gets you clobbered every time, especially with the 'Bu as the '08 was a major re-design making the previous gen's less desirable. I drive an '05 'Bu LTZ V6 and you just cannot beat the gas mileage on the 90 degree V6 3.5, I routinely get 25-26 MPG in mixed driving and 217HP is enough to get you on the onramp safely.

 

[Jumpem]

Originally posted by: Kroze
I love people like you . Seeing how you are with cars, I recommend you lease instead of buying. You seem to want to change cars every few years.

I change cars every couple of years, but don't lease because I drive 30k annually.

As for the OP, I would keep the car you have and buy cheaper cars in the future.

 

[alkemyst]

A dealer may throw the difference onto a new car loan, but you are looking at $6000 so it'd have to be a pretty high end car and you'd be looking at paying for probably a ton of dealer installed items worth about a fifth of that.

It should hopefully adjust more out in a couple years if you take good care of the car. I doubt you will ever break even though.

 

[KDKPSJ]

Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never break-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

 

[Bignate603]

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

 

[Mermaidman]

Originally posted by: Fraggable
Back in early 07 I bought a 07 Malibu LT V6 for around $24K. That price may seem a bit high, but the dealer paid off my 01 Mustang V6 for what I owed . . .

Therein lies the problem with your thinking--Nobody is paying for the depreciation except you.

Originally posted by: Fraggable
I currently am 24 and live with my parents but will be moving out within 12 months - I plan to buy a small house when I get married.

It's great that you have some goals, but they will be harder to achieve if you keep spending your income on cars. If you're planning on living independently, then you should also incorporate a cushion in your budget and not have every penny allocated to rent, car payment, entertainment, etc. Good luck!

 

[sindows]

Originally posted by: Bignate603

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

Wheres the hating? Everyone knows American cars depreciate faster than just about any other make with the exception of Korean cars. This is especially true for the cheaper bread and butter models. Even at the high end, American cars depreciate like a mofo. I've seen Navigators with 60k price tags lose 50% of their "value" in two years. Of course thats a SUV but the same goes for their cars. A 3 year old cadillac sts sells for ~25k..

 

[KDKPSJ]

Originally posted by: Bignate603

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

Sorry about typo (Meant break-even, duh ) But I said OP will never break-even until OP pay-off, which is so freaking true. In OP's situation, his Malibu with $ 18.4k pay-off is only worth $ 10k.

Will he ever see the trade-in value higher than amount what he owe? Maybe around 54th month of the payment out of 60 months? Yeah, it's not never, but it's same as never for OP as he is trying to trade-in his car now. (He won't wait another 48 months to see break-even)

BTW, this is based on 60 months financing, which is a lot more optimistic than OP's situation. If you play around with the number given in OP ($ 300/month payment for $ 24k car, $ 18.2k left after about 18 months), you can come up with:

1. 72 months or more financing at 1% or lower
2. Made a lot of down-payment, and at 60 months financing

Either way, it makes OP situation worse than my assumption of 60 months financing. Especially if OP made some down-payment, which OP never told us about since it would make the situation even worse, the answer is pretty clear.

 

[BUTCH1]

The key point is to keep it until most of the depreciation is over, say 8-9 years. If you are going to trade in a domestic every3-4 years you will get hosed. Keep in mind that you get more upfront with domestics for less $$..

 

[Bignate603]

Originally posted by: everydae

Originally posted by: Bignate603

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

Sorry about typo (Meant break-even, duh ) But I said OP will never break-even until OP pay-off, which is so freaking true. In OP's situation, his Malibu with $ 18.4k pay-off is only worth $ 10k.

Will he ever see the trade-in value higher than amount what he owe? Maybe around 54th month of the payment out of 60 months? Yeah, it's not never, but it's same as never for OP as he is trying to trade-in his car now. (He won't wait another 48 months to see break-even)

I agree that he's getting screwed by depreciation. I just can't understand why the depreciation on some American cars is so bad. Yes, your chevy cavalier that wasn't maintained will drop like a rock, however a good midsize with decent reliability shouldn't drop faster than average. Even though many American cars are becoming more comparable in reliability to Japanese cars they still have this huge penalty in resale value. I can only imagine its public perception.

 

[KDKPSJ]

Originally posted by: Bignate603

Originally posted by: everydae

Originally posted by: Bignate603

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

Sorry about typo (Meant break-even, duh ) But I said OP will never break-even until OP pay-off, which is so freaking true. In OP's situation, his Malibu with $ 18.4k pay-off is only worth $ 10k.

Will he ever see the trade-in value higher than amount what he owe? Maybe around 54th month of the payment out of 60 months? Yeah, it's not never, but it's same as never for OP as he is trying to trade-in his car now. (He won't wait another 48 months to see break-even)

I agree that he's getting screwed by depreciation. I just can't understand why the depreciation on some American cars is so bad. Yes, your chevy cavalier that wasn't maintained will drop like a rock, however a good midsize with decent reliability shouldn't drop faster than average. Even though many American cars are becoming more comparable in reliability to Japanese cars they still have this huge penalty in resale value. I can only imagine its public perception.

Well, how do I know? You can only follow what market is, you can't change it. Same goes to Korean cars. I am Korean, and I know Korean cars are a lot better than what they were 10 years ago. All the magazines/people/auto shows etc praise about how Korean cars became dramatically better for last 3~4 years, but depreciation/resale value is almost same as 10 years ago.

 

[Bignate603]

Originally posted by: everydae

Originally posted by: Bignate603

Originally posted by: everydae

Originally posted by: Bignate603

Originally posted by: everydae
Financial-wise, you already made a huge mistake when you bought brand-new American brand car (which you already know). You will never brake-even until you pay-off because of that one mistake you made.

But OP, I know you will never listen to us as our advice is totally opposite to what you want to hear. So, why don't you bring your car to dealer and see what they offer you? Who knows if some dealer offer you something like your co-worker's Kia?

:roll:

More American car hating.

Sorry about typo (Meant break-even, duh ) But I said OP will never break-even until OP pay-off, which is so freaking true. In OP's situation, his Malibu with $ 18.4k pay-off is only worth $ 10k.

Will he ever see the trade-in value higher than amount what he owe? Maybe around 54th month of the payment out of 60 months? Yeah, it's not never, but it's same as never for OP as he is trying to trade-in his car now. (He won't wait another 48 months to see break-even)

I agree that he's getting screwed by depreciation. I just can't understand why the depreciation on some American cars is so bad. Yes, your chevy cavalier that wasn't maintained will drop like a rock, however a good midsize with decent reliability shouldn't drop faster than average. Even though many American cars are becoming more comparable in reliability to Japanese cars they still have this huge penalty in resale value. I can only imagine its public perception.

Well, how do I know? You can only follow what market is, you can't change it. Same goes to Korean cars. I am Korean, and I know Korean cars are a lot better than what they were 10 years ago. All the magazines/people/auto shows etc praise about how Korean cars became dramatically better for last 3~4 years, but depreciation/resale value is almost same as 10 years ago.

That's why I think its mostly public perception. People think they are worth less, so the price goes down regardless of their true value.

 

[KDKPSJ]

Originally posted by: Bignate603

That's why I think its mostly public perception. People think they are worth less, so the price goes down regardless of their true value.

Well, I know. That's sad fact, but you can't change it, so follow it.

 

[BUTCH1]

One of the reasons of the rapid depreciation is the large amount of domestics (and Koreans) that end up on the market after rentals dump them with low mileage. Asians have wisely avoided that by not getting too much into fleet sales..

 

[Bignate603]

Originally posted by: everydae

Originally posted by: Bignate603

That's why I think its mostly public perception. People think they are worth less, so the price goes down regardless of their true value.

Well, I know. That's sad fact, but you can't change it, so follow it.

Nope, go against it and buy a low priced used 1.5 year old malibu that somebody just traded in and lost their shirt on.

 

[Jumpem]

Originally posted by: Bignate603
:roll:

More American car hating.

It's not hating the vehicle itself. It is that american cars depreciate rapidly. It is simply not a good financial decision to buy one.