Should I refinance an upside down car that I will sell next year?

Question

I bought a brand new 2006 Toyota Prius (that I absolutely love!) in August 2006. I have almost excellent credit and received a fairly good interest rate, which I believe to be 3.79% (I think, but I don't have the info in front of me right now) with 6 years of payments still left. Ugh. I currently owe $23,100 on it, even though I've made extra payments. This is roughly $5,000 more than what Kelly Blue Book is telling me it is worth. Double ugh.
Up until now, I thought I would drive this thing into the ground, but my plans have changed and I have decided to move to a city where cars are optional, thanks to public transportation! I'd like to sell my car before I move; however this move won't take place until sometime in 2008 and up until then, I'll need to keep my car and keep paying on it.
So, my question is, should I try to refinance now so I won't be "upside down" when I sell it next year? And if I am "upside-down" when I sell it, how do I pay off the difference? With another loan?

As for unreliable public transportation in the new city and all of that - I am moving with someone who owns a car and is going to keep the car, so I can always use their car if necessary.

Turns out, I was way off on my current interest rate. The actual interest is 7.34% and it's a 75 month lease. Thanks!

Answer 1

Since you have such a low rate, do not refinance. Instead, send extra monthly payments on a separate check. They can be whatever amount you can afford and on the description line, write "to principal only". Car loans are simple interest so the more you pay down your principal, the less interest you will pay. With a 6 year loan, you will be paying more interest than principal for first 3 years, so if you lower your balance, you will lessen the interest paid as well as your contract term.

KBB is only a guide and never actually offers to buy cars at the prices they claim. If you want to get a real value, take it to Carmax. They will put money out for your vehicle. I hope this helps. If you have any questions, I am available.

Answer 2

Your problem is the 6 years of financing, the inflated price, etc. Your interest rate is low. Your best bet would be to find out what the monthly payments would be on a more reasonable length of loan (much higher) and figure the difference between what you are putting on the car and the higher payment. Stuff that amount of money or more into a credit union account each month until you are ready to sell the car and you might have enough to pay off the car. Pay more on the car when you can.
Spend time on looking at resale values of used Prius's and see whether demand is up so high that the Blue Book is behind the (momentary) times.

Answer 3

no no no no no. The best thing you can do is try to pay down the upside down. One thing you can do is find a new car that has a lot of rebates. Many people are upside down. You can also demand the dealer to sell his car at invoice and use the rebates to get you in a better place on the next car. Never refinance you negative equity. Next time you buy a car and you are upside down you should make a larger payment to pay down the loan faster. OK hope this helps,

Answer 4

The longer you keeep the car the less upside down you will be, this will take time but will work. So you should continue to drive it and pay as much as you can, don't refinance because you will not get a better rate. When you get about 6 months from moving start looking to sell it as this will take awhile, but selling it on your own will usually net you $3000 more. Be prepared to cover your negative equity of of pocket, as you will need to have the clear title in order to sell it. Good Luck

10 years in auto biz

Answer 5

NEVER,you took the hit on financing due to your bad credit history.(you are paying for this in lengh of your loan,do the math)don't make a bad thing worse.
sit on that car and make advanced payments to the principle of the loan.this will bring down the loan balance and pay off the crazy interest faster for you.
don't get screwed again.
once this car is paid in full your credit should look pretty good.
based on your moveing idea, i would look for a person with a credit union approved loan to TAKE OVER PAYMENTS and then you can walk away with no worrys about your credit.

Answer 6

if you sell you will have to eat the depreciation of the vehicle plus the interest,plus,plus.if you can afford it,keep it for 3 years then sell,you may even get ahead a little at that time. as for public transportation,dont fool yourself,you will always want to go somewhere were there is no public transportation.its a case of pay now or pay later,good luck.