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GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13626 posts

Car Purchase question...
We bought my wife a new 2013 Kia Optima in August of 2013. Financed $16,000 over 60 months at .99%. This worked out to $295/month for a new sedan with a 5-Star Crash rating, a 60,000 bumper to bumper warranty along with a 100,000 mile powertrain that was extended to 120,000 as a courtesy and is transferable.

We are 9 months from payoff (owe $2,655) and she currently has 67,900 original miles.

On Auto Trader, similarly equipped cars are retailing from dealerships for anywhere between $12,000-$15,000 within 500 miles of my location (BR Capital Region).

Our plan is to upgrade my wife’s vehicle but my question is when is the best time to do it? I have some upcoming expenses for Mardi Gras that prevent me from simply paying off the remainder early. I could still swing it a few months early but is that cost worth it to maximize trade in or private party sale?

Will waiting until September of 2018 to upgrade her vehicle be financially beneficial to be on the market closer to model year end, or will I get more trade in/private party value by paying off as soon as possible and looking to upgrade during the middle of the year?

Thanks in advance for any suggestions.


iknowmorethanyou
LSU Fan
Paydirt
Member since Jul 2007
6104 posts
 Online 

re: Car Purchase question...
I think you already know Dave would call shenanigans on this whole process.


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tigeralum06
LSU Fan
Member since Oct 2007
1797 posts

re: Car Purchase question...
So you don't have $2,500 to pay off a car note, but want to upgrade a 4 year old vehicle.


GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13626 posts

re: Car Purchase question...
I have the $ but it’s earmarked towards other things as I said. I’m open to being ripped to smithereens here but my wife is the type that feels secure with a new vehicle. She is willing to be economical but warranties and low miles are important to her and while I’m okay driving a vehicle with 247,000+ miles, she is not and I have compromised with her by working to find economical new car choices (hence the Kia Optima choice in the first place).

In other words, I do not want to upgrade a 4-year old vehicle. My wife and I have reached a compromise that it will be upgraded as economically as possible.

We started down this road by me telling her to begin looking at what’s out there in advance of paying the car off. That resulted in her seeing significant MSRP discounts on current model years and made me wonder about trade in value now versus September as it relates to timing the market for the best pricing.
This post was edited on 1/2 at 9:36 pm


Will Cover
Atlanta Braves Fan
Savannah, GA
Member since Mar 2007
33834 posts

re: Car Purchase question...
If your wife prefers to not be out of warranty, does leasing make sense for you and her?

I'm normally against leasing, but with you owning a business on the side, this may be something you can look into.



GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13626 posts

re: Car Purchase question...
I’ve never even entertained the idea. Pros and Cons in your view?
This post was edited on 1/2 at 10:18 pm


Shepherd
LSU Fan
Member since Nov 2009
2127 posts

re: Car Purchase question...
At some point, they absolutely tried to get you to buy an extended warranty when it came close to going out of warranty. $1500 bucks if I had to guess.
Cheaper than a new car..


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10
momentoftruth87
Arkansas Fan
IL
Member since Oct 2013
11327 posts

re: Car Purchase question...
quote:

I’ve never even entertained the idea. Pros and Cons in your view?


Cons? The scary things you hear.

Pros? Good things you usually don't hear.

I had a 3 year lease (2015 Ford Explorer), got out of it at 2, and made money, because I took care of it and was under miles.

Reason we got rid of it, I moved to a state that transfer wasn't a friendly option and they wanted me to pay sales tax again on original purchase price.

Called a dealership in new state to see what they could do, and ended up paying it off, giving me credit towards trade in.

^ don't know how often this happens, but it worked for me.

I know I'm not the guy you replied to, but that's my story.

Would I lease again? No.


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Will Cover
Atlanta Braves Fan
Savannah, GA
Member since Mar 2007
33834 posts

re: Car Purchase question...
quote:

Cons in your view?


Below is for an individual buyer, not looking to lease the vehicle in his/her business name.



Leasing provides a good deal for four parties - the sales person, the F & I guy, the dealership’s owner and the finance company (leasing company). It is a lousy deal for the customer. You owe something, but you own nothing. Leasing adds a layer of complexity to the deal that allows the salesman to hide or misrepresent the true purchase price.

Most people are quick to answer a sales person when he/she asks if they’re planning to buy or lease a vehicle. As soon as you give away that you’re planning to lease, the price of the vehicle (capitalized cost) will freeze up. You’ve essentially lost any leverage you had at this dealership. You should negotiate the price of the new vehicle as if you’re going to pay for it with cash out of your own pocket and then bring that over to the lease.

Leasing has become an incredibly effective tool for dealers to sell their product at a significantly higher price and profit margin and is often “pushed” or “encouraged” through the sales process.

• Leasing makes the car more affordable and therefore easier to sell. The buyer gets focused on being able to drive a nicer vehicle for a lower monthly note than what they most likely could not afford to buy.

• It allows the customer to afford a more expensive car, and the more expensive the car, the larger the profit.

• Leasing allows the dealer to legally hide the true cost/price of the vehicle and charge you a higher price than you would normally agree to.

• A leasing customer is more likely to return to the same dealership to get their next vehicle and next vehicle and next vehicle. Even though your original sales person will be long gone, the dealership is able to maintain customer retention and that’s where it pays off in the long run.

An inflated residual value lowers your monthly payments, but it can also handcuff you. A more realistic residual value will make it easier to sell the lease, trade your vehicle in the middle of the lease or buy the vehicle at the end of the lease. Many people get lured in by the low initial payment, but should beware that all the financial factors that go into leasing, including trading in your current vehicle to obtain a new leased vehicle will effectively ensure your monthly payment will be much higher in subsequent leases. This makes it hard to break the cycle and purchase future vehicles with a sizable down payment.

Simply put, leasing is the equivalent of throwing a $100.00 bill out of your vehicle’s window every week for 3 years in terms of depreciation. The bottom line is this … any way you look at it, leasing is a convenience that you’ll pay for in the end. Put another way, if you can’t afford to buy your next vehicle with a four-year loan or less, then you really can’t afford it. The better deal long-term is to buy a reliable vehicle (good, late model used vehicle or lower priced new vehicle) and hold onto it as re-leasing every three to five years is no way to build wealth.


GaryMyMan
USA Fan
Shreveport
Member since May 2007
13495 posts

re: Car Purchase question...
quote:

warranties and low miles are important to her

Sorry for being off topic, but how many warranty repairs has the Kia needed in these 4 years?



LZ83
LSU Fan
La
Member since Sep 2016
6052 posts

re: Car Purchase question...
Pay $350/ month till after Mardi Gras then upgrade.


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Will Cover
Atlanta Braves Fan
Savannah, GA
Member since Mar 2007
33834 posts

re: Car Purchase question...
quote:

Pros


I don't mean this is a derogatory way either ...


If you can't afford to buy the car your wife wants, lease it.

Leasing will provide you with a vehicle that is always under warranty and/or free maintenance service.

You can deduct lease payments on your tax return, if used for business. Consult with your tax attorney or CPA.

Lower monthly payments and typically, lower up front cash. This will be dependent upon how well you can negotiate.

Allows you to "afford" more car. You may want to opt for "gap" coverage when leasing.


In my opinion, it sounds like your wife would be a great candidate for a certified used vehicle. Typically, these vehicles will have a longer warranty than a new purchase vehicle with warranty and can be purchased for several thousand dollars less than buying new.

Or put another way, the money that you would use for a capitalized cost reduction for a lease (down payment) or for a purchase could be anywhere from $500 up to $3000 to $4000 dollars (ideally with a lease, you want to put down as little as possible or more with a purchase) ... think about whatever you want to put down (lease vs. purchase) and see how that compares to "saving" that money for any future repairs on her Kia. Just a thought.

Hope this helps.
This post was edited on 1/3 at 8:45 am


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LSUtigerME
LSU Fan
Walker, LA
Member since Oct 2012
1855 posts

re: Car Purchase question...
quote:

Will Cover

You get a lot of respect when it come to the car buying process, but this copypasta statement you use is somewhat misleading and sleighted against the process. It has good points, but also conveys a huge negative connotation through some inaccuracies.

To the OP...the car is only a 4 years old and has fairly low miles. Really consider the need to to get rid of it. Far and away the better financial decision would be to hold onto the vehicle.

If you are dead set on getting rid of it, it’s difficult to try to time the market. You’re dealing with a combination of the best value for your trade-in, and the best value for the purchase (incentives, etc), assuming a new car. I would assume your trade-in value will drop when the next model year is introduced, and a little more if it’s a new “generation” of that vehicle. However, incentives on the prior year car and deals will be much better.

Paying off the car early will not save you much at all. At the low interest rate, you’re not paying much interest. Whether that payoff comes from savings or the equity, it doesn’t matter.

As far as leasing, if done through the business it has some additional advantages. However, at 4 years and 67k, that’s a lot of miles for a lease. You’d have to run through all the numbers for the car you want, and understand what will happen with the equity you have in your current vehicle.
This post was edited on 1/3 at 9:02 am


Will Cover
Atlanta Braves Fan
Savannah, GA
Member since Mar 2007
33834 posts

re: Car Purchase question...
quote:

but this copypasta statement you use is somewhat misleading and sleighted against the process.


I copied it from my original post on the subject. And I do believe in my statements about the negative aspects of car leasing. It is up to the OP to decide what is best for him and his wife. He may not be at peace unless his wife is at peace.

quote:

To the OP...the car is only a 4 years old and has fairly low miles. Really consider the need to to get rid of it. Far and away the better financial decision would be to hold onto the vehicle.


In a separate post, I gave him options and what my recommendation would be.

This post was edited on 1/3 at 9:18 am


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hungryone
LSU Fan
river parishes
Member since Sep 2010
6945 posts

re: Car Purchase question...
I hear ya on the compromise, but I'm going to suggest that you approach the next car differently. Stop buying relatively low quality cars and she may just be happier to hang onto the car a bit longer. I don't mean that the Kia is low quality in terms of mechanical, but in interior fit & finish. If your wife isn't a gearhead or techy, she is probably judging the car primarily on the interior F&F and how well/poorly it ages. Buying a low-mileage used, certified pre-owned vehicle from a "better" manufacturer may be a better solution, financially and to keep her happy.

I usually drive my cars 150K+ miles. My Chrysler was getting raggedy inside at 175K. On the other hand, my Volvo's interior looked identical at 220K. Currently driving a GTI....interior feels like a much more expensive car.


GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13626 posts

re: Car Purchase question...
quote:

GaryMyMan


quote:

Sorry for being off topic, but how many warranty repairs has the Kia needed in these 4 years?


One issue with the Bluetooth and USB adapter we noticed within a few days of the purchase. There was a Recall notice about 5,000 miles ago due to something like a Catalytic Converter or some reports by owners about a cylinder failing due to some dust issue from the factory.

We brought it in, checked it out and all was fine per the dealership.

ETA: Thanks for the DV whomever you are!
This post was edited on 1/3 at 9:32 am


hungryone
LSU Fan
river parishes
Member since Sep 2010
6945 posts

re: Car Purchase question...
Another suggestion to get her to defer the purchase: once the car is paid off, tell her to save the equivalent of a new car payment each month. The longer she goes, the more cash she'll have to apply toward a "nicer" new car.


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GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13626 posts

re: Car Purchase question...
quote:

LSUtigerME


quote:

However, at 4 years and 67k, that’s a lot of miles for a lease.


First off thank you for responding. Really appreciate it. In regards to this part of your post, she would not have put that many miles on the car. But for the past year, any work for my business (I travel throughout the 5-Parish Metro BR area and have ranged from Tickfaw to New Iberia here and there) that was more than a few miles was done in her car whenever possible to extend the life of my beater SUV I drove.

This was the case from July 16-late Sept 17 when I upgraded my vehicle. I would approximate that a little less than 10% if that mileage total belonged to me in relation to business miles.

In other words we would just barely be over her bumper to bumper warranty period. With the upgraded vehicle for me I am assuming that even local normal driving will be miles out on my vehicle (full sized truck) from here on out, which means she will have much lower mileage totals and potentially be within her warranty period by the point in time we pay off any new vehicle she gets this year.


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GaryMyMan
USA Fan
Shreveport
Member since May 2007
13495 posts

re: Car Purchase question...
Image: http://www.reactiongifs.us/wp-content/uploads/2014/10/aha_coming_to_america.gif


I kinda figured it would be minor stuff. The larger point I was trying to make is that “even a Kia” is gonna be pretty damn reliable for 7, probably even 10 years. A warranty was once a necessity but these days only a few cars really need them.
I paid probably $2k extra to buy my wife a CPO Lexus RX (2 yr warranty) vs non-certified. Did we use it once? No.

That said, if your wife wants a new car buy the lady a car.


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Mingo Was His NameO
LSU Fan
318
Member since Mar 2016
5238 posts

re: Car Purchase question...
This isn't what you want to hear, but there is really no logical reason to buy a new car other than wanting one. The car you have is about 1/3 of the way through its useful life. If it's been taken care of it should be in excellent shape at that mileage. If she wants one, and you agree to buy it then go for, but your wasting money.

I don't say that to be negative as everyone wastes money on something.


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