Buy a new car or not??

Question

I am considering buying a car, but would like some opinions. I have a 2003 Pontiac -based on Kelly's Blue Book it's worth around $5,500. I owe $7,500.00 on my current vehicle.
I would like lower monthly payments & w/a down payment can probably achieve this and have a new car.
BUT, is it better to pay off my current loan OR buy a new car w/lower interest and lower monthly payments?

Also, I'm going to finance my vehicle w/the same company my current loan is with. Do you think they'll give me a better interest rate since my credit w/them is good? (Only 1; 30-day late payment since my loan originated in 2004.

Answer 1

You can do this, but it is probably not the most financially repsonsible thing in the world. Think about it this way. Monthly payments are only half of the equation. Total debt is the real story. By switching cars you will continue to pay for your current car for as long as you have the new one. That's assuming that you get 5500 from the Pontiac. This may not seem like a big deal, but it's the beginning of a cycle of debt that you can avoid. Stick it out with the old car and improve your financial position. Then once you're out of this undesireable loan, think about a new car.

Answer 2

The banks always find a way to screw you. They'll take that one late payment, and make it look like you were habitually late (happened to me) and jack up the interest rate of the loan. If you're with a credit union, your best bet is to go with them.

The blue book (resale) value may be $5,500, but trade in is like $4000 tops, and the dealer will almost always find something wrong (also happened to me), even if there isn't and knock off the price. (especially if you're car, which is 5 years old, has more than 35000 miles *totally unreasonable*)

There's not much chance you'll get a smaller payment on a new vehicle, but your best shot is....

1) Sell your current vehicle yourself
2) Pay the remaining balance (approx. $2000)
3) Pre-qualify for an auto loan at a credit union at an ideal rate (in the low 6s)
4) Buy a car that you've researched, and can live with. You probably won't be able to turn this one around as quickly, since new cars have poor resale. Ideally, this car should last you 7 years/ 100,000 miles or more.

If any of these steps seems to be a snag, abort the plan and wait at least another year (making all debt payments on time).

Answer 3

Even one late payment makes you not the ideal customer. Most people don't make late payments ever and still can't get lower payments by buying a new car. When you say new, you mean a new used car? Because if you buy a new car there's no way your payments are going to go down. I suggest you pay off the car you have. That's why Americans are always in debt cause they always want more, better, bigger. Once you own your car outright you'll actually be able to start saving money!

Answer 4

Well, it sounds to me like your already on top of the situation. I'd really shop for a car that has some good rebates so that it will help make up the negetive equity that you have. That's what I did when I bought my Impala in Feb 07. I got GM in about $4,000 in rebates. It was sweet. Anyway, you only need $2K, not hard to get. Make sure you buy a car that is in your budget. Don't be pulled in by a salesman who wants you to have a bigger car with a bigger fuel sucking engine. With the price of fuel rising to $4/gl by spring/summer, you'll want a 4 cyl I think. G'luck.

Answer 5

I say no, finish paying the one you got first!. Be careful you'll never get out of debt!