Downgrade Car?

[gear02]

Hey guys - I need your help in figuring this out.

I bought a new BMW 328i about 6 months ago. It's a really nice car, but given the layoffs at my company I was thinking maybe it's time to cut down on monthly costs to build up some savings. Right now I pay about $600 a month for the car. I know I lose a lot of value early on but I figure if I can remove this figure from my monthly costs and get a cheaper car it would be worth it (thinking very short term right now). KBB says my car is worth about $32k for private dealer. My loan for this car is under 30k (can't access my accounts to figure out).

What do you guys think about the financial impact of selling this car and getting a cheaper car (in the range of 15k)?

How would I do something like this? Would I go to a dealer or sell it privately (though I'm very wary of the complications of this)?

[Daedalus]

1) Saving money for a rainy day is always a good idea, so kudos.
2) Like you mentioned, a private party sale requires you to jump through more hoops than a dealer to take care of the financing aspects, but it can be done. It's also much more of a hassle dealing with all the retards that had the bright idea they can make a living low-balling every single car ad they can find.
3) You've probably realized that 1 of the complications in the sale is you'll either be carrying 2 cars at once, or have no vehicle between the selling and the buying.
4) A dealer will *always* f*k you over on a trade-in. It's a business to them, they have to make sure they're profitable, and they know a lot of people don't want to deal with 2) and 3).
5) Forget what the blue book says your car is worth; KBB doesn't adjust fast enough in times like this IMO. You can only go by comparable listings and sales for similar cars. Also check out the bimmerforums.com marketplace, maybe become a member and ask some questions.
6) Financing another car will be an inquiry on your credit record, which will have a small impact on your credit score.
7) Buying your next car is the same story; you'll pay more at a dealership than private-party (as an aside, I don't think "certified pre-owned inspections" are worth the paper they're printed on.

Who holds the note on the car loan? BMW or a bank? I know for a bank you can talk to the manager, tell them you want to sell the car, and ask them how to proceed. They will probably ask for a direct wire or cashier's check from the buyer's bank, and they'll turn over the pink. It's a bit of a hassle, but pretty safe if the 2 banks are involved in this way.

If you do this you will definitely save some money (principal plus interest difference), but there are transaction costs. You'll probably have to pay sales/use tax on the next car, plus registration, licens and maybe smog fees. Forget the lost value of the bimmer; that value is already lost whether you keep it or sell it. Selling it now before it loses more value is a good idea. On the upside, you'll probably pay less in insurance with a cheaper car.

If I needed to choose a reliable and high-value car I would be looking at 3-year-old Hondas and Toyotas.

[InfiniteNothing]

Usually not worth it because of sales/use tax.

[LPMiller]

it's only going to be worth it if you can get the loaned paid off with the sale. You can certainly buy a new car really cheap these days, but what you you don't want to do is carry over any of the loan of the old car onto a new one.

[gear02]

I figure it's a good time to buy a car because of tax breaks and stuff, though I don't know what's available. But my primary reason is to drop my monthly car payment by least 400.

My loan is held by BMW. I have $27k left on my car and KBB says about $29k.

1. How would I sell it to a dealer? I don't know if dealers buy your car if you're not buying a new car from them.

2. If I trade in my $30k car for a $14k car, they're not going to give me $16k in cash would they?

3. What would you guys do?

[Daedalus]

Local comps. (http://seattle.craigslist.org/search/sss?query=328i+2008&srchType=T&minAsk=min&maxAsk=max)
I would be surprised if any dealer wouldn't buy your car for the right price. The problem is the "right price" for them is a bendover price for you. Look at the comps. They have to stay competitive on the resale, so the buy is where they lock in some level of certainty for a profit. In this environment, a dealer is going to be VERY cautious in giving you an offer. The used cars they're offering now were probably bought for at least $4k less than what they're asking. You can get a free quote from carmax to set a floor and know where to set your expectations.

If you owned the car outright, a dealership would give you cash + a cheaper car for your bimmer. But you're not going to walk away with much, if anything, because you have very little equity in your current ride. BMW holds the title. You and the buyer, private-party or not, will be working with them to secure the title, so maybe you should contact BMW, tell them you want to sell the car, and see what their requirements are. If you can agree on a price above what you owe on it, the buyer (or their lender) may have to cut 2 checks; one to BMW and one for the difference to you. I respectfully disagree with the previous comment on only selling for more than what you owe on the car. The value of the car and the principal on the loan are 2 different things. You do not consider sunk costs when evaluating options in a financial decision. I know it goes against the grain of what seems right, and that's human nature at work. Just like it's natural to not want to sell a stock or a home that's underwater.

What I would do is probably not relevant, since it depends a lot on other personal factors. But I would probably get a loan from either my credit union or my parents to buy my 2nd car (used, private party), and then start listing the bimmer for sale on craigslist and autotrader.

It sounds like you're looking at getting another brand new car. Why not go used, if saving money is the goal? You can find pretty nice cars with extended warranties for under $15k. Incentives on brand new cars carry over to used cars too. If new cars become cheaper to own, then used cars have to follow suit to get sold. The free market works fairly well in this case.

[WhiskeyPapa]

IMHO, it's always good to get out of a $30k car. I'm 43, and cars are no longer a "passion" for me. They are basic transportation and nothing more. I can't imagine spending more than $5k on a car. Ever. I'm also a very good car "hunter" and negotiator. I could probably sell the car I bought for $4700 three years ago for more than that today.

Do you have any friends/relatives that are car salesmen? I've learned that having a car salesman as a friend is better than having a cop or doctor or lawyer as a friend. That's how you get the best deals and don't get ripped off.


1. How would I sell it to a dealer? I don't know if dealers buy your car if you're not buying a new car from them.Yes, they will if the price is right. Unfortunately it has to be VERY right for them. You need to shop that car around to at least five dealers. Tell them you're shopping it around and you want their best offer up-front.


2. If I trade in my $30k car for a $14k car, they're not going to give me $16k in cash would they?Yes, but they're probably giving you $30k in trade for a $14k car that's really worth $8k-$10k. But yes, you can drive out of there with a check.

Your best bet is to not treat it as a trade. Negotiate on selling your car to a dealer first, then look for a good *used* car. Don't buy new. Let someone else take a butt-kicking on the depreciation.


3. What would you guys do?I would (and have) put it up for sale myself. Sure, it's a hassle, but you're going to save at least $5k over giving it to a dealer.

[attgig]

carmax will buy cars even if you're not selling to them. you can go in for a free estimate of how much they'll buy it off of you for

[Jihforce]

I would put a nice "for sale" sign and shoot for a 30k sale price, after all, it is almost expected that the buying will try to negotiate a lower sale price, so you might as well anticipate that. As previously mentioned, the only drawback of selling the car privately is the hassle, but you get paid for that hassle so its not too bad.

Trading the car in will pretty much put you upside. That is almost a guarantee these days. I would suggest that you go and get the car appraised and see what the dealer offers. Just don't tell them what you owe or you will get a way lower offer price for sure. There are many dealers that will buy your car without having you buy one from them. The advantage of buying a car from the dealer is that you can try to milk the dealer for more on the BMW if you buy another car from them. In any case, you will still come out ahead if you sell privately. So it all depends on how much effort you want to put in. As for Carmax, yes, they will offer a quote for 7 days without requiring you to buy a car. The thing is, Carmax doesn't exactly offer you that much more for your car than the dealer would. I had one of my cars appraised last year and it came out the same as 2 other dealers I was getting appraisals for.

If you would like, I can help you out by posting your car and whatever pics you may have on my blog to see if some of my readers are interested. I typically cater to the leasing crowd, but the 3series leases aren't all that great this month. Shoot me a PM if interested.

[Maarchk]

I figure it's a good time to buy a car because of tax breaks and stuff, though I don't know what's available. But my primary reason is to drop my monthly car payment by least 400.

My loan is held by BMW. I have $27k left on my car and KBB says about $29k.

1. How would I sell it to a dealer? I don't know if dealers buy your car if you're not buying a new car from them.

2. If I trade in my $30k car for a $14k car, they're not going to give me $16k in cash would they?

3. What would you guys do?


Around here, some dealerships will take care of your car and your loan if you buy a new car. So you could go to them and buy a new cheaper car and they would pay off your old car. I hear radio ads on this but there are probably details I don't know. BUt it doesn't hurt to go to the dealer and ask...

[Jihforce]

Around here, some dealerships will take care of your car and your loan if you buy a new car. So you could go to them and buy a new cheaper car and they would pay off your old car. I hear radio ads on this but there are probably details I don't know. BUt it doesn't hurt to go to the dealer and ask...

They NEVER payoff your car. They just roll over negative equity into your new loan, so essentially you are paying for the new car PLUS the part of the old one. Some dealerships will have a disclaimer at the end of the commercial saying "negative equity may be applied to new loan" or something like that. But they use that fast speaking dude so we don't pay much attention to them. Haha

[gear02]

I decided not to do this because I would lose so much money at this point. Even assuming that I would get more than what I owe on my current loan (which is a stretch), I would still have lost what I would have gotten on my trade in. Then I would have to get a really, really cheap car to save any money. Getting a car at $200 a month without any downpayment would be tough.

[cheapie]

on the plus side you're still driving a new bmw. =)

[gear02]

on the plus side you're still driving a new bmw. =)

Yeah, no complaints...but I do wish I can save more money.

I'm actually consulting with a few dealerships to see what they can do. I may be driving something cheaper soon, but we'll see.

[gear02]

What do you guys think about going down to a lease? With a lease I can be down to $149-199 a month (and for a civic hybrid too). I understand the whole lease/buy thing but I figure it's an easy way to get my payments down fast.

Also, anyone know how you go from a car with a loan to a lease?

[gear02]

OK - so I pulled the trigger to lower my car payment. It was hard to get a good trade in because the sales values on BMWs are pretty depressed around here. I was getting quotes for 23-25k and then they were offering LEASES for $380 for civics. I found one dealer who would go $27k and they had this nice 2006 black Honda Civic LX Coupe with only 14500 miles and it was marked at $3k less than KBB value (apparently it was a loss leader). So with this scenario I got rid of the car and get to build some equity. Plus, I'm actually very happy to be driving a Civic again - AND it's one of the redesigned models which I've always wanted so I ended up with one, just in a roundabout way.

Quick questions, though. The finance manager offered me two things to purchase - I KNOW I'm supposed to say no because these things are crap but I wasn't too sure.

1) Gap Insurance for $500. For the life of me I can't remember in my first two cars whether I had to buy this extra. Does this make sense to have on a used car?

2) Extended Warranty - normally on a new car I'd say no faster than he'd talk, but this car has like 1 more month on it's base 3 year warranty. It cost like $1600 and I wasn't sure what to do - is this a smart deal?

Luckily I can cancel pretty easily so I figured I'd ask you all for advice - what do you think?

[Daedalus]

I don't think I would get either one, but you should be clear on what your insurance covers and how they determine value. $500 does sound like a huge ripoff on a used car that isn't depreciating all that fast, and factoring in the relatively low probability of the car getting stolen or totalled. I would sooner take part of that $500 and get an alarm, only because Honda's do get stolen more often than most cars.

Extended warranties are like playing a slot machine. Sometimes they pay off big, but usually they just take your money. A Honda will most likely be very reliable. $1600 would go a good way to getting things fixed. Since you have 1 month left, get under the car and make sure you don't see any signs of leaks. If you see any wet areas, take it in ASAP to give yourself a little run-around buffer. I informed a buddy of mine his car was leaking. He took it in, and they told him they fixed it. But they didn't do anything, and when he realized it, the car was out of warranty and they wouldn't do anything for him.

[Jeffbx]

Gap insurance - no. You should actually check your car insurance company - this may already be included in your coverage.

Extended warranty - yes, but talk him down on the price - $1600 is too high. You're as likely to get a crap car from Honda as anyone else, so I'd go with the warranty. However, when I bought mine my friend was working at a dealer & he got it for me at cost - 7/70 complete coverage on a new 30k minivan set me back $1200 and it MORE than paid for itself over the years.