All you finance experts

[Carolina]

Hubby wants to save $$, and thinks a good start would be to sell his F150 truck (30,000 miles) and buy a Hinda Civic. However, we do still owe quite a bit on the truck loan - 3 yrs and $19,300 to be exact. And the dealer only offered $16,000 as a trade in, so we would take a $3300 loss to start. The dealer told us that a new Civic would be (for example) $365/month for 5 years.

To me, the best way to compare the cost of the vehicles would be to calculate the operating costs of each vehicle over a 5 year period - including gas.

For the truck: $19,300 (loan) + $50/week (gas)x 52(weeks) x 5 yrs = $32,300

For the Civic: $365 payment x 60 months + (3300 loss on truck loan) + $25/week (gas) x 52 weeks x 5 yrs = $31,700

Thus, over the next five years, purchasing a new Civic (and allocating a gas savings of half over the truck) - we would save only $600 over that period. Obviously, this is not a substantial savings despite the fuel economy of the smaller car.

We consulted with a relative about the numbers, as he is a finance nut - he used a whole bunch of complex equations which I honestly had a hard time following. And he came out with the new car saving us thousands of dollars. Considering that I love and respect this person, I don't want to disrespect him, but think my numbers are much simpler - and correct!

Thoughts?

[buz-lh]

I would guess the other factors to include would be the costs of maintenance and insurance and resale value of each vehicle at the end of five years and having to rent a truck every time you went to Home Deport or the garden shop. Also does the $365 payment on the Civic include rolling the $3300 you owe on the truck? If so, you're off by 3300 out of the box. If you have to write a check for the $3300 then your math is correct. I sure wouldn't give up a nice truck for a civic if I was only going to save a few hundred dollars. I really don't believe you will cut your gas consumption by 50% in the real world either.

[Bebot]

You also have to consider the following for the next five years.

Maintenance on the Civic is probably cheaper....
Insurance on the Civic is probably cheaper....
Five years from now your Civic probably have a better resale value....

[Carolina]

The $365 does not take into consideration the $3300 loss on the truck.
Also, I think the truck is safer for hubby to drive (important to me). Insurance may vary a little, not sure - hubby's initial thinking was that the civic would be cheaper due to gas savings, and he says it will have a better resale value. We have a friend who has an extra truck that is at our disposal at any time, so we aren't losing too much utility.

I'm wondering if we would have better luck selling the truck ourselves for the cost of the loan? I see the exact same truck (same options, miles, etc) going for $25,000 at local dealers. Not sure how, but the ads are there.

[wantonebad]

You are taking a huge hit in depreciation, you've already bared the brunt on a new truck, now you are going to do it again for the civic. Buying a new car is a bad investment, but you compound that by doing it twice and handing the Honda dealer whatever equity you may have on the truck, taking a loss on the resale and then paying top dollar for the new civic.

If you have to then sell it privately, yes it’s a pain in the @$$, yes it will take longer but you'll get more for it. Personally I wouldn't sell it at all and I ABSOLUTELY would NOT trade it in! Think about it, you're rationalizing loosing thousands of dollars original value of the truck and purchasing costs for the civic all to save some money on gas.

Sorry if this is coming off as harsh I'm just trying to be clear about my opinion and it is only my opinion but this is a bad move

[sea-dweller]

I would not trade-in the truck, but sell it private party. You will definitely get a much better price that way. Research what that model of truck is selling for in your area, to get an idea of the recent sales prices. This is give you a good idea of the 'market value'. Then, make adjustments to your price accordingly (mileage, any special features, etc). You may find that you will be able to sell the truck to a PP for much more than the dealer will give you for it. Keep in mind that the dealer is buying for resale purposes and will ALWAYS low ball you on a trade-in offer.

[Carolina]

Originally Posted by wantonebad

You are taking a huge hit in depreciation, you've already bared the brunt on a new truck and now you are going to do it again for the civic. Buying a new car is a bad investment, but you compound that by doing it twice by handing the Honda dealer whatever equity you may have taking a loss on the resale, and then paing top dollar for the new car. If you have to then sell it privately, yes it’s a pain in the @$$, yes it will take longer but you'll get more for it.

Personally I wouldn't sell it at all and I ABSOLUTELY wouldn't trade it in, think about it, you're rationalizing loosing thousands of dollars in original value of the truck and driving off the lot a second time with the civic all to save some money on gas.

Sorry if this is coming off as harsh I'm just trying to be clear about my opinion and it is only my opinion but this is a bad move

No worries - after I saw the numbers, the deal doesn't make sense to me. If we must sell the truck, I think we should do it privately, and buy a much older Civic. It's just interesting to hear other opinions.

[astcell]

In three years Ford may not even be in business!

[Timber Loftis]

Originally Posted by astcell

In three years Ford may not even be in business!

Out of the Big 3, I would say Ford is the most likely to still be in business in 3 years, and beyond.

[dbernard01]

Don't do it! I just sold a 2003 F150 (paid off) and got into a VW Jetta back when gas his $4.00.

Long story short, I'm miserable! I miss my truck. I too can borrow from friends and neighbors but hate to ask.

Just think how you would feel when a friend asks to borrow your rolex for the weekend. :)

[Arby]

Don't do it.... My F150 is almost 4 years old (next month) and still drives beautifully.

[Carolina]

Ron, that's a nice looking truck. Our is grey, and it's hubby truck, but I have to admit that I really like it too!

[Timber Loftis]

I think that any proposition that begins with saving/making money by selling a used car is flawed. A used car is almost always worth more to you to keep than you can get for selling it, and this only gets more true as the car gets older. From an economic standpoint, you should drive your cars into the ground and then sell them just as parts. They simply depreciate too fast.

If you are going to sell, sell to a private party if possible -- it will be smarter than using the car as a trade-in. With a trade-in, they're going to get you by hook or by crook. If they give you a good value on your trade, they're going to be less willing to come off the sticker price of the new car.

My trick with car dealers is to not trade in and negotiate a big discount off the sticker price. They usually assume they can do this and make their money back on the financing end. Then I sit down with their finance guy and say "oh, no, I'm just gonna write a check for it."

[Launch Mini]

Only $50/week for gas in the truck.
Don't sell it. Cost to keep it is not that much.

At least you did the math BEFORE you traded it. I have a couple friends who didn't.
One guy, sold his F150 for $15,000 and bought a $30,000 car to save gas. He will NEVER recover $15,000 in fuel savings, plus he needed the truck to haul a boat to the lake & back.

[Carolina]

Originally Posted by Launch Mini

Only $50/week for gas in the truck.
Don't sell it. Cost to keep it is not that much.

At least you did the math BEFORE you traded it. I have a couple friends who didn't.
One guy, sold his F150 for $15,000 and bought a $30,000 car to save gas. He will NEVER recover $15,000 in fuel savings, plus he needed the truck to haul a boat to the lake & back.

I used the $50 as an example, but with gas going up I think hubby says it's more like $65 these days.

The issue is that my husband has been consulting with someone who convinced him that the monthly bottom line is the way to go. I tend to look at the bigger picture. When you do the math, it's a wash really.

[astcell]

A friend in NC has a Ford F150, 1971, with 32k on it. :-)

[Launch Mini]

You also missed the interest on the remaining truck loan over the next so many years.

[Carolina]

Originally Posted by Launch Mini

You also missed the interest on the remaining truck loan over the next so many years.

No interest loan, which is why I included the pay-off price only. I'm wondering if my husband got a great deal on his truck (he knew the dealership owner) as all the dealer classifieds on the same model/year mileage are close to what he paid for the new truck.

In a 50 mile radius, I am only able to find a few private sellers - mostly older trucks. The one that is closest has twice the mileage, and is asking below blue book value. The dealers who are selling trucks similar to my husband's are asking $25,000 and up.

[Launch Mini]

Saying this, I have a friend, bought a Civic, they have 270,000km on it, only change the oil, timing belt every 100,000 & just recently a head gasket.
Besides that, it is tight.

[Bebot]

Tell your husband to be a man and keep the truck so he can keep on trucking.

[Carolina]

Please - someone help me explain why the below analysis is not correct. I know it isn't but can't put it into concrete terms. BTW, this is an excerpt from an email I just received from a friend. Obviously, it does not match my cost comparison I stated in the first post:

















"I think we're all getting paralysis from analysis. What you need to do is think of it in more immediate terms:
1. You get rid of a gas guzzler and some "down the road potential repair problems," not likely for some time on a new car, especially a Japanese one noted for quality.
2. You reduce your car pymnt. by $40.mo
19,300 you owe on the truck divided by 42 mo's. = $460/mo
vs.
21,900 for the Honda + 3300 you will owe after CarMax = 25200 divided by 60 months
= 420/mo.
Savings: $40/mo. from car pymnt. + $100/mo. on gas = $140 in your pocket for 42 mo's + the gas savings keep on coming.
3. Yes, you will still have to keep paying on the Honda and that is what it finally comes down to. Is it worth putting $140/mo. in your pocket for the next 42 mos. or are you better off without the extra money now in exchange for a shorter payment period at the end of which you are still looking at a far more expensive vehicle to run.

Still looks like a good deal to me"

[Welshwatchman]

Originally Posted by Carolina

Please - someone help me explain why the below analysis is not correct.


"I think we're all getting paralysis from analysis. What you need to do is think of it in more immediate terms:

1. You get rid of a gas guzzler and some "down the road potential repair problems," not likely for some time on a new car, especially a Japanese one noted for quality.

Servicing costs, tyres, insurance and repairs difference between the two cars could be substantial, perhaps $1000 p.a cheaper with the Civic.

2. You reduce your car pymnt. by $40.mo
19,300 you owe on the truck divided by 42 mo's. = $460/mo

If you refinance the agreement there will be extra interest applied so the $460 will rise.
vs.
21,900 for the Honda + 3300 you will owe after CarMax = 25200 divided by 60 months
= 420/mo.
Savings: $40/mo. from car pymnt. + $100/mo. on gas = $140 in your pocket for 42 mo's + the gas savings keep on coming.

The $3300 will be subject to compound interest, increasing the $25200 mentioned to $26500 approx. This comes to $442 pm.

3. Yes, you will still have to keep paying on the Honda and that is what it finally comes down to. Is it worth putting $140/mo. in your pocket for the next 42 mos. or are you better off without the extra money now in exchange for a shorter payment period at the end of which you are still looking at a far more expensive vehicle to run.

Still looks like a good deal to me"

5 year running cost:

F50

Purchase cost remaining $19300.
5 years insurance (est) $3000 (You can amend this to suit actual figures known to you)
5 years gasoline $13000
5 years maintenance/repairs/tyres etc $3000

Total - $39,300.00

Civic

Purchase cost remaining (inc the 3300, compound interest) $26500
5 years insurance (est) $2000 (You can amend this also if you have a proper quotation)
5 years gasoline $6500
5 years maintenance/repairs/tyres etc $1200

Total - $36,200.00

Precious little difference (unless the F50 has a major repair bill out of warranty).
Gas prices may get a little bit silly though in due course.

Why not sell the F50 and try to get the $19,000 to settle the finance and get a $15,000 Civic (or similar)?

This will run you a total of $29,000 over five years. A saving of over $2,000 per year.

I personally wouldn't do it. I sold my gas guzzler Merc ML and bought a compact executve diesel Merc, hated it, flipped it after just 3 months and bought a big BMW. I may has well had a bonfire of cash, idiot me.

If he hated the Civic as much as I hated the C Class Merc then you may regret the whole exercise.

[Carolina]

Originally Posted by Bebot

Tell your husband to be a man and keep the truck so he can keep on trucking.

My husband really enjoys his truck. He is considering sacrificing it if it helps the family finances. I do have a headache, and maybe I took your post the wrong way.

[Bebot]

Originally Posted by Carolina

My husband really enjoys his truck. He is considering sacrificing it if it helps the family finances. I do have a headache, and maybe I took your post the wrong way.

I apologize if I gave you headache. I was just being happy and kidding because of being Friday. I think the last analogy from your friend's email makes alot of sense.

[Carolina]

Originally Posted by Bebot

I apologize if I gave you headache. I was just being happy and kidding because of being Friday. I think the last analogy from your friend's email makes alot of sense.

No, you didn't give me the headache and I apologize as well. I'm feeling a little snappy as this car thing is driving me nuts. Please keep making jokes - we need them around here.

[jdc]

I think your figures are right, the email seems all over the place.
I suppose the factors to consider are which vehicle fits in better with your life style

Q's Are gas prices going to soar in the next few years? This may even be a political stance by the govt if they increase duty on gas to encourage people to run more fuel efficient cars as they do in Europe.
What would the resale value of the car be now and in the future when larger or less fuel efficient cars may not be so desirable

[Carolina]

Originally Posted by jdc

I think your figures are right, the email seems all over the place.
I suppose the factors to consider are which vehicle fits in better with your life style

Q's Are gas prices going to soar in the next few years? This may even be a political stance by the govt if they increase duty on gas to encourage people to run more fuel efficient cars as they do in Europe.
What would the resale value of the car be now and in the future when larger or less fuel efficient cars may not be so desirable

Well, Martin - they have been going up again lately, but I'm no fortune teller. I do know that something just passed in the House a few days ago - it gives people a $3500 - $4500 tax credit on the purchase of a new car that is more fuel efficient (when they trade in a truck or other gas hog). However, the truck would be disposed of, rather than resold.

[Dr.B]

Keep the truck.

The going rate at a dealer auction as of last week for a Ford F150 4WD V8
Reg. Cab 5.4L XLT is: $8,350

A 2007 Honda Civic 4D Sedan EX Auto is selling at the auction for: $ 13,014
A 2006 "same as above" $8,233
A 2006 Toyota Camry 4C 4D Sedan LE is selling for $9,440

[ratae1950]

My 10 cents.....

I would assume gas prices will rise as soon as the economy gets stronger, so use a price of today + 30%. With the F150 you are more at the mercy of speculators and any nut that decides to perpetrate murder and mayhem in the Middle East, or Venezuelan Marxist, or Nigerian tribal conflict, or Russian dictator Putin, etc., etc.,.
Give a private sale a try. Maybe consider a late model Civic. I have recently rented a truck from Home Depot [3 times] to pick up gravel, stone dust and pavers, and each time I was able to use it for an hour and a half for $30--no surprises! I was able to get my stuff and satisfy my macho urges!
Good luck, your husband sounds like a mensch!!! Bubba would not give up his truck.

[Carolina]

Originally Posted by ratae1950

My 10 cents.....

I would assume gas prices will rise as soon as the economy gets stronger, so use a price of today + 30%. With the F150 you are more at the mercy of speculators and any nut that decides to perpetrate murder and mayhem in the Middle East, or Venezuelan Marxist, or Nigerian tribal conflict, or Russian dictator Putin, etc., etc.,.
Give a private sale a try. Maybe consider a late model Civic. I have recently rented a truck from Home Depot [3 times] to pick up gravel, stone dust and pavers, and each time I was able to use it for an hour and a half for $30--no surprises! I was able to get my stuff and satisfy my macho urges!
Good luck, your husband sounds like a mensch!!! Bubba would not give up his truck.

What is a mensch?

Edited: Thank you, I just looked up "mensch". Yes, he is one!