I have money to pay off car - should I or pay higher down @ the dealership?

Question

I owe about $6,500 on my car. It is worth about $2,500 from the dealership and maybe more if I sell it to an individual - which I don't want to do b/c that seems like a pain and I live in a ski town, etc. Anyway, I have $8,000 saved up and can pay off my car and use the $1,500 on a down payment OR would it be more advantageous to pay it off and go to the dealer with a zero balance and $1,500 down, or does the dealership like to see a customer with $8,000 cash down on a new vehicle?

Answer 1

You would be better off to pay your old car off and go into the dealer with a free and clear trade in. You owe more than what the car is worth. So look at this, if you trade it in now, the 2500 value means you still owed 4500, which they will put on the loan for the new car.
Even putting a lot down on the new loan, you're going to have to pay extra interest and whatnot. You want to opt for a smaller loan over a larger down payment. In the long term, it would save you more in interest.
Pay off the old loan, save yourself the interest on that. Go to the new place with a 2500 car that you own right out, and the extra 1000 cash you can put down.
Instead of putting 8000 down on an exaggerated loan, you're putting 3500 down on a decent loan. It's a much smarter deal.

Answer 2

I don't think its going to matter to them. If you put $8000 on a car, they will still have to pay off the first loan, so to them, its not going to matter. What you can do is pay $4000 on your old car, get it to about what it is worth. You can bargain a little more if you are not up-side down on the loan. Then with that remaining $4000, you can put that towards the new car. Basically, you won't get much for your car, but you are trading it in, and they want to sell a car, so you will have a bargaining chip. You aren't desperate that way either, and you can always tell them you will leave if they don't give you what you want. The dealers want to keep you in the shop, so they will do whatever it takes to sell you the car.
However, if your credit sucks, they won't help much, if its good, then they will kiss your butt to get you to buy a car from them. Just remember, you are in charge, not them. They might own the car, but each day it sits on their lot, the more money they lose. Also, watch the APR rates, Chevy likes to try the 11% at 72 months, or 5% a 60 months. You might get a lower payment, but you pay more in the end.

Answer 3

I would pay off the car and use the rest as a down payment.

As for the old car, you can trade it in or sell it to an individual. You'll end up making more money by not using it as a trade, however it is the easiest option.

Answer 4

using a trade is almost always the better option. Besides the value of the car, there is the point of leverage, getting $500 more than initially offering, etc. In addition, there is a tax savings. If you buy a car outright, you pay the sale tax based on the total cost. If you trade in, the trade in amount is removed from the total cost amount, since, you have already paid sales tax on that car.