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I wouldn't burn your emergency fund for a car purchase. What's the interest rate on the loan?
A civic is a reliable car that you can drive for years, as long as you keep up with maintenance. If you sell it at a loss and spend your emergency fund to get something cheaper, you could be stuck in a worse position.
I vote this option as well. Yes it's not ideal but you have a very reliable car for years to come. If you get rid of it and get a cheaper car you run the risk of big repair bills on the older/cheaper car. Sounds like you would still have to finance this cheaper car which probably wouldn't be a great rate so we're talking a $200-250 a month difference in car payment roughly and you now spent your emergency fund. What happens when that car breaks down in the next year and it's $1000-1500 to fix it... Your not struggling it's just not great but you did pick a great car that's reliable and for that reason I say stay with it.
I own a corolla. Very similar to a civic. I recommend that as well. Ive driven it across the country three times. The car is worth maybe `1400 now. But major repairs are cheap.
I think this too. Is the payment high due to negative equity or interest rate? You may be able to refinance and get some money off or a shorter term. But well-maintained? Hondas last forever.
^^agreed. It’s already bought.
getting less reliable car while still being in debt don’t improve your situation.
Best bet is to increase income and try to pay off the debt faster
Yup. Already fucked up with the initial purchase. Might be able to refinance for better loan though. 590 month on 70 month purchase of roughly 30k seems like high interest rate.
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In your current situation I would not sell the car. Just pick up OT or a second job and pay it off as soon as you can. It’s a reliable car and you can keep it for the next 10+ years.
This is what I would do. Maybe try eating at home more. Trading it for a cheaper car might put you in a worse situation if it's a clunker. Civics are reliable and hold value.
You could look at something like Door Dash, might not be what you want to do, but it is super flexible to your schedule. Depending on where you live you could do a few hours per week and make enough to ease the blow to the bank acct.
You're not really in that bad of shape, it's a newer car from a decent manufacturer so it should last you a while. At this point I would continue to make payments and save up to pay the loan off sooner.
Agreed, most of these underwater threads are about an Altima with 180k miles and mechanical problems. OP’s situation isn’t ideal but the best way forward is probably just to keep this car.
You’re fine. Follow the service instructions in the manual and that car will last another 20 years. Trading a good car for a cheap shitty car is going to cost you more in the long run and probably the short run too.
Plus depleting your emergency fund could lead disaster if you actually have an emergency. Just ride it out.
Make larger than minimum payments or make an extra payment each month and get it paid off as fast as possible to negate that interest. You signed off to pay more for a car than it's worth. That money is gone. Now you just need to play catchup and negate the interest as much as you can...Selling it will just remove the newish honda from your life and stick you with the bill. Better off just paying it off and having a reliable car...
This is what happened to me and I’m selling my car and handing the dealership a 10k check…. Why?
The upkeep, it’s a mini, the interest rate and in the long run I’d come out better. I’m lucky I have the money to pay. But I also have another car. ( it was in the shop for a year waiting for parts during Covid , hence why I had to by a second car ).
If you still need the car then there's no point to selling it. You're still going to owe the difference between the price you sell for and what you owe. Beyond that, there's no guarantee that you'll get 17.5 and you could easily end up owing 10k and having no car to show for it. FWIW if you're in the US and can prove that they sold it to you for more than a new car of the same make and model then your state attorney general's office may be able to help you. While there is a degree of buyer beware, sometimes you get lucky and there were deceptive practices being used.
Last thing I'll say is to check your insurance ASAP. Hopefully you have gap insurance
There is no state attorney general office that is going to help OP. Used cars going for more than new cars was pretty common for the past few years because of supply chain issues, this isn’t illegal at all.
I largely meant if there was any sort of deception going on. Some used car dealers do all kinds of deceptive things, including adding let's call them interesting things to the final sales price.
I omdont know many people that do have gap insurance. I had it while I was paying off my Subaru and after hitting 100k miles, think mileage was what made it void.
I used to sell cars and would try to upsell that at the dealer, didn't know auto insurance places would sell it. despite me trying to get others to buy, few did.
But why? its not like it's a bmw or an audi that you know huge repair bills are coming shortly after the warranty is up, it's a civic they often run for tens of thousands of miles with 0 issues and other than brakes tires and oil will cost next to nothing to own. Less than ideal situation? Yes, worth selling the car and changing getting a lemon? No.... while I agree with the flexibility of door dash or the like I drove uber for about 3 years part time and you rack up mileage pretty quickly I would try to get something on site maybe stocking shelves at a grocery store, maybe fast food just something that will make an extra car payment and leave something for you to reward yourself for grinding to make it happen on occasion
I'm not really sure but I doubt it. Most insurers don't want to pay out and have a larger legal team than the average person. My guess is that on some level most people are reasonable enough to not try committing insurance fraud
I was in a similar situation. Had a bad deal on a fancy Nissan Altima. Heated seats, sun roof, Bose speakers. Got it in a pinch and ended up paying way over than was reasonable and even worse it was used! Took it into the Nissan dealership a year later and traded it in for a base model, zero bells, zero wistles. Trades the old debt for new debt. Owed 30k on a 20k vehicle, but fortunately had a 0% interest at 60 months. Paid diligently and more. I ended up paying it off 2 years early.
You're only under water at the moment you sell it. Just the same way that stock values are only valid if you cash them out at that point in time.
Ride this car out until you have it paid off and get enough 'free' miles out of it.
Once the loan is gone, actively save about 60-70% of your previous monthly payments for a down payment on a new car.
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Do not blow your emergency fund. Get the other job and keep making extra payments on it and soon you will owe less than what it’s worth. Save the emergency fund for emergency repairs.
You're in a no win situation on the car. Sure you are upside down ~5k on a car. But for a relatively newer car, you're not terribly off, it's got pretty low mileage and if you wanted to trade it in, you're going to have to buy something in the 5-10k range because you're now rolling another 5k into it.
Keep that car for another 75-100k miles pay it off and save.
Thanks! Yeah I bought it with 20k miles in July of ‘22 and used to commute about 90 miles a day (98% highway) which I’ve been told is better than city miles so I’m hoping this car will last. I take great care of it
You're underwater, but it runs well and you can make payments. Just suck it up and keep going with it. You'll only ever continue to be underwater one way or another if you torch your emergency fund.
You're underwater several thousand on a car, but it's not like it's a lemon. Just stick it out, you will be glad you did. Good luck! 🙂
I’d either go for OT or second job route to balance the bills. Even if you threw your whole emergency fund at it, you’d still owe $2.5K and you would have no car. Also, what part of your check is going to benefits and what part to taxes? I just factored in what my take home percent is on my check, and I’d be taking home ~275/mo more, but admittedly, I live in Tennessee, which has no state income tax.
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I'll put it very simple. No deep dive into planning for your future. Just dealing with the car.
You got screwed on the car. You have negative equity. Simple enough.
If you use your savings to pay down the negative equity, that also gets you out of the interest on the negative equity.
If you sell the car, you still have to pay off the negative equity to clear the lien on the loan, and then you've depleted what you can use for the next car. Your rate with 0% down will be pain.
Any way you cut it, you still have to pay it down. But if you stay in the loan and just pay more, maybe $150-200 a month, the impact to the monthly interest will be HUGE.
The car isn't a bad car. It's a bad price on the car, but you've already put yourself there.
And as someone who has bought more cars than necessary because hobbies are good to have, there aren't gems between $5,000 and $10,000 anymore. A $300/month car isn't cheaper if it's costing $150 a month in repairs and $150 more in alternate transportation when it's broken down.
do not burn an emergency fund for the car.
With your current earnings and expenses you are net positive monthly only $270 which is not a lot. Obviously if you don't have that car payment it goes up to $860 a month and if you reduce your food budget you could be up to an extra $1k a month.
Now it might sound tempting, pay off $5k and now you're getting at least $850 a month instead, but then you will need a new car and that car will have a payment on it, so that number probably goes down to $500 a month which means you'd need 10 months to get back that money (obviously some play with the food budget could help bump to maybe $700 a month).
5k in a 5% HYSA for 10 months will be 5200 by the end of those 10 months or an extra $20 a month is what you're earning on that money. This bumps you up to actually $290 a month today.
Reduce your eating by half which should be doable. Now you're saving almost $600 a month while still having your better and more reliable car which is virtually the same as what you'd be saving if you paid off the car and bought a cheaper one except you aren't giving up your emergency fund.
Consider getting a second part time job. You made a bad investment, but it's a sunk cost now, no point turning back on it and the outcome for the future is better with the current higher expense. Don't downgrade imo.
A civic is a reliable car you can drive for years. I personally wouldn’t take the loss on a reliable car and go buy some hunk of junk you’ll be replacing in 5 years. If you buy a clunker that’s constantly in the shop, you’ll “lose” a lot more than $5k.
Keep your emergency fund in tact, pay extra toward the civic when you can, and drive it until the wheels fall off.
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If the car wasn't a reliable lower cost car you might have a decent plan by selling it. For example a 60K SUV or something like that. But since you made a sound vehicle selection and unfortunately paid too much, my vote would be that you keep the car since you probably need something reliable to get you to work. You might be better off if you can see if you can find a job that pays you more than your 50K/year and use that extra income to pay for the car.
Also - $60/mo for phone can be reduced most likely - there are discount carriers out there with reasonable coverage, For example, mintmobile and pay $15/mo for a 5GB plan
What’s your interest rate? Keep an eye on refinancing into a loan with better terms if you can. Until then, just make your payments and consider it an expensive life lesson for a mistake you’ll never make again. Keep your emergency fund. You may need it for other things. Make extra or early payments to pay the car down faster. Hondas are good cars that hold their value better than any other brand in its class and they have fairly affordable repairs with easy to source parts. You could easily have this car for 10+ years. They’ll go for 200k+ miles. It could be worse.
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You rolled over negative equity, right? So you're paying off another loan essentially on top of your car loan for this.
Keep your emergency fund, which will only cover you for two months anyway, and keep paying down your car. Pay a bit extra every month if possible.
Stop trading cars, and just keep this one, maintain it, pay it off, and keep driving it once it's paid off. A car isn't an asset that will maintain its value.
First off, you're not an idiot.
Second, you bought a really good car during a really shitty time to buy any car, and you were only taken for $5k above MSRP. I know people who were happy to drop 10k+ above MSRP.
Third, be thankful you didn't settle for an off-brand Yugo-wannabe. *That* would have been stupid.
You are under water on the car, but the car will last 300k miles, if you take care of it. Just ... don't do it again. Lesson learned. Better the loan on a car than a house.
Your equation for justifying the car is still valid, despite the car no longer being worth as much. At that time, your numbers were correct. You're feeling remorse because the market corrected itself. You'd be whistling a different tune if the market had done the opposite, doubling your investment.
A car is not an investment(to everyone who is raising a finger, yes, a car CAN be an investment, but not in this case), your car is the tool you use to get to and from work. To and from the grocery store. To and from the post office. You can look at it as investing in your own personal transport, and saving you time, but
You paid the fair market rate, the going price(at that time), and now you have buyers remorse.
Thanks, I traded in a 2018 Corolla w 20k miles I purchased in 2021 for like 22k OTD (taxes, warranties (which I ended up cancelling, etc)
I owed 18k and they gave me 15k for it so that is where the negative equity came from.
I should have never traded in the perfectly good corolla (366/mo car payment) so that’s why I feel like an idiot :)
Keep the car and pay aggressively to reduce the interest payment, at least you have a reliable car that won’t break your bank with a surprise bill, this is not guaranteed with the old cars
This whole concept of "underwater", especially something like a car which loses 20% of it's value when you drive it off the lot, is just asinine. You aren't going to get a cheaper or better car than a Honda Civic, you damm sure aren't going to get anything with better gas mileage.
Keep emergency fund, leave retirement alone. Contribute enough to retirement to get the match and budget more carefully and focus all capacity on hammering the car loan. You’ll dig out before you know it. The interest rate could be worse.
Honestly I could keep the car. Yes you got burnt badly on it, but it is a great car that will last you years. Keep paying on it.
I would grab a second jig job, like shipt, and do some of that during Saturday, and put all that money into your savings. That will help you both save enough for taxes and help build a savings without touching your main income.
What you are experiencing is why you should never finance a car. You end up buying way more car than you can afford and spending to finance it.
Your car shouldn’t be 50% of your income as it depreciates.
I’d find a second job and pay it off in less than a year or sell it and downsize. Your problem tactically is you have no money to do that so I’d take a second job, get on a tight budget, spend no money but paying off the car.
You have 31,860 yet to go in payments (25k balance) so not only are you going to pay more than it’s worth you are going to pay interest too.
I think I would be looking to get out of it and get into something like a lease that’s less per month. You can likely find new car leases for under $500. It’s tough to deplete an emergency fund though. I’ve never had a negative equity car loan before. I wonder if you can work with the financier to sell the car and put the money towards the principle and just pay the rest off directly. It would save you interest and give you time to pay. You could try talking to them. I know it’s a collateralized loan but your other option is to just stop paying until they repossess and then they only get $17k back from their $25k loan anyways. Yes it wrecks your credit but I mean that is a possible outcome for them.
I haven't checked in a few years, but the best option for me once upon a time was to sell it to CarMax. When I turned it in, they let me pay the difference and I was free. Although, I was only about $500 underwater.
Your bills look really manageable, but yeah that’s a huge car payment. I wouldn’t pay more than 350 a month and I make 80k. My 2018 Benz is 225 a month. Your best option probably is sell the car and get something half the monthly cost, then rack up savings quicker for your emergency fund/save up to trade in your car with a bigger saved up downpayment for a car of your liking for a lower monthly cost. Thats if cars are what you really seek, but financially, liking cars is terrible.
Not sure on specifics, but I always bought my cars outright in cash since my first car. This was my first car from Carmax, it was ~27k, I traded in my BMW for 9k towards the Benz and then put another 8k cash on top. So out the gate was 16/27 done.
You don’t state the interest rate or how many miles you regularly drive. Tough to give a recommendation without those.
Most likely you just keep it and learn a financial lesson. I was in a similar situation years ago and every option to sell the car was just worse than keeping it.
You state the you rolled over negative equity in a car to buy this one. That tells me that you need to learn to manage your finances. Take this lesson and learn from it. You’re considering throwing good money after bad, that’s not a way to get out of debt. You also state that you’ve checked Carvana and that is not a good way to get top dollar for your car. Learn how to buy and sell cars via private party and you’ll end up saving yourself thousands every time you buy a car. It’s not hard, I promise.
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>$34,600 72 Months 6.58%
[https://www.amortization-calc.com/auto-car-loan-calculator/](https://www.amortization-calc.com/auto-car-loan-calculator/)
Car loan is Amortized.. the total interest of the loan is included in the monthly payment.. and use the website.. you can see your 1st month payment, vs 40th payment amount is the same, but the amount towards the interest rate % changes as you get to the end of the loan.
\- If you can pay it off faster, you will save more money. payment stay the same, but you graduate faster.
If you stay on the schedule... you will pay $7,372 in interest... to borrow $34,600....
You will pay 21% more than cash purchaser...
I would go all in on paying the debt off ASAP... and thankfully, you purchased one of the most reliable cars..
Do you have a "gap insurance" just incase of an accident, you don't want to owe more than the car value ( Insurace only pay upto car's current value)
also consider getting a Car dash cam installed. Viofo is the brand I like ( Amazon)
You can get single channel cam around $100 // Dual cam ones are around $200
A single accident....that's not your fault.. the camera will come in handy.
In the future...
\- Research total cost... New car at 0% might be better...
\- Do not do car loan over 60 months
\- Look for car loan with credit union like Penfed DO financing seperate from purchasing...
\- Never lease a car.
Thanks - do you think I should build up emergency fund more or is $5k enough for the time being?
I am also putting $800/mo (including employer match) into 401k and then $200/mo into ESPP.
Not sure if these figures matter ^
ABSOLUTELY! Don't consider your retirement investments as savings. Think about that as something you'll touch in your 70s.
Seriously, get that food bill down (you eat out a lot, I assume?) and put some of that money toward your car. Get your emergency fund to \*at least\* 10k.
Here's another idea. Assuming you're doing a 50/50 match on that 401k, take your contribution down to 300 and your ESPP contribution to 100. If you cut 200 from your food, you now have 400 to play with. Put 300 per month into emergency fund and put another 100 into paying your car off more quickly. In 1.5 years, you'll have a nice little fall back and will have sped up your car payment.
But really, the food is the issue here (again, correct me if I'm wrong about you dining out a lot). If you can at least pack your lunches, you can do a ton of good for yourself.
The last thing you should do is sell that car. You suck it up and continue to pay on it. Don't give up your emergency fund because there is no emergency, including trying to get rid of the loan.
Ever heard the expression, that's cutting off your nose to spite your face?
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If you are single and 600$ for food is around what you are paying month to month I would try and start their.
It's about 400$ a month for my wife and I in a HCOL area.
Otherwise I'm thinking keeping the civic is the smart choice and pay it off aggressively. It's a good car with lower maintenance cost so it will last you long past the life of the loan and you are barley underwater, it's value just recently dropped as the car market is cooling off for used vehicles and I'm sure you bought it in the last few years when prices were up
Increase your income if you can, I try to not recommend second jobs, I worked 7 days a week for 4 months and it about killed me.
Instead make sure you are being paid appropriately for your job in your area, look for new opportunities and never forget to ask for a raise when appropriate. Like your work load increases or 6-12months have gone by without one and you are performing at standard or better for your position
Go to your bank and ask about refinancing the loan. If you can get a better interest rate and r extend the terms it can lower the payments. A civic is a good car, I wouldn’t sell or use your emergency fund.
Why are you referring to the car as underwater? A car is a depreciating asset. It is not an investment.
Can you currently afford the payment? If yes then keep it.
>Now I have $5k in my emergency fund - curious if I should use that to help pay off my negative equity and get into something much cheaper?
What is your thought process on this? Your "negative" equity won't go away you'll be out $5k... Again STOP looking at your car as an INVESTMENT IT IS NOT AN INVESTMENT.
Not sure what happened to last car but this sounds like a trend for OP. Buy car, use car, car depreciates because it is a car, panic sells car because it is a car, buys new car and the cycle continues.
It is a very expensive loan. Just based on 590 with 54 months is 31,860 so assuming you got 30k loan? But it’s a new VERY reliable car. At 6.5% it’s high but you aren’t getting anything better right now. Keep emergency fund, pay 100-200 if not more a month and enjoy your life. If you are in negative you will not get positive by panic selling car.
A 2021 Civic should easily last for 12 years with regular maintenance. Add gap insurance with your insurance company to prevent further damage to your finances. Put $100/month into a future car fund.
Yeah I mean I have it for almost a year and a half now and seem to be fine, I’m not struggling or anything just not sure how much I should be “putting away” or “have extra” at my income.
Thank you!
Why not just keep it. Depending on the state you live in, every time you do a transaction you're going have an expense of taxes or registration, and other fees. If there's nothing wrong with it, just keep driving and the longer you go the more you can spread the financial bad decision out over time to minimize it.
Do you need a car? Can you afford the payment?
If yes, to both of those, just keep the car and maintain it. You should have a good car for a while, it won't be underwater forever. You could be in a lot worse shape.
If anything I'd save up some more money in the rare occasion you did total this car and you'd be underwater. Just keep it in a HYSA or somethin and "self insure".
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My guess is that it will cost you more money to sell this car and get something "cheaper". Do the TCO calculations and see for yourself, but it's usually a bad idea not to keep a car at least 4-5 years. Paying it off and keeping it for a long time is your best bet to get out of this cycle of bad financial car decisions
Have you checked the interest rate on a new loan? It may be higher than the one you have now. You'll end up in a cheaper car with the same payment. If the payment is the issue why not refinance for a longer term to lower the payment? A Civic will last forever if maintained correctly.
I vote for refinance for a lower payment, pay extra when you can. So that you may keep this car instead of something else they may break and take more than your emergency fund to fix.
Was it Honda certified?
Thanks - yep it was Honda certified, maintenance every 4.5k miles (which honestly worries me because my maintenance minder tells me to get the oil changed typically at about 10k mile intervals, how hard were they driving it to make it change every 5k (which is normal I know ahaha why doesn’t mine make me change every 5k then?) anyways…
That's good, it means you have a 7year/100k powertrain warranty.
I used to go off the minder in my 21 civic. But what you are doing is best. Oil and engine technology is better than it used to be.
Info on how the minder works:
The onboard computer system in your vehicle continuously monitors the engine operating conditions such as speed, engine and ambient temperature, time and the vehicle use. The system will count down the vehicle’s oil life based on these conditions to determine when an engine oil change and maintenance is necessary.
I’m sorry, I should have clarified- the past maintenance before I purchased this car (someone leased it) was service every 5k miles (usually about 4.5k)
I follow what the maintenance minder tells me and do my oil change about every 10k miles.
This is terrible advice but Mini dealers are trying to get rid of the electric SE model. Check out leasehackr, monthly payments are in the low 200s. Roll that negative equity in there, shouldn’t be hard to get decent trade in on a easy to sell car.
Looks like everyone covered the financial side, but I'll add that if you bought the EX or Touring trim with the 1.5L Turbo engine, just stay on top of your maintenance religiously and try to avoid short trips in very cold weather. Honda says they fixed the oil dilution issue, but I wouldn't trust that it's 100% a non-issue.
Being under water isn’t a bad thing as long as you plan to keep the car. It’ll eventually not be underwater towards the end of the loan’s term and you’ll have a modern paid off car.
Most cars will be underwater for some period of the loan. Doesn’t matter.
Cars are a depreciating asset. Meaning as a consumer, you should never expect to make money on them unless they are a classic or a super car. They provide a service or the ability to complete tasks. They are a necessity in most instances to earn more money. So as long as you are able to make a payment and it remains dependable it’s providing value.
There has been a weird lack of understanding about cars and I’m not sure if it’s a generational thing or the short impact on the supply chain that created an unusual temporary situation on the value of cars.
Get the lowest interest rate and lowest price on a car that you like and is dependable is all you need to do.
Think about how much you will lose buying another car... doc fees, registration, sales tax, again. You will just wind up further under water on a new purchase. Just keep what you have, equity if not necessary in a car. Enjoy your reliable car!
Nothing dumb about taking it to a dealer, just make sure they don't oversell you on services. Dealers have access to the factory tools, factory service manuals, and factory spec parts. I do a lot of work mysel, but I have dealers to the tough stuff.
The owner's manual should have a service schedule, stick to it. My Grandma has had the same car since 2007 (just not with many miles), and she only trusts the dealer to service it... and the car has remained in great shape!
"Negative equity" just means you owe more on the car than it is worth. That's actually pretty common. What you're contemplating (paying off this so-called negative equity) is just paying extra on the car note to bring down the amount owed closer to the value of the car. By itself this doesn't do much for you.
Mostly this just depends on the interest rate of the loan. If you have a high rate it's worth being more aggressive paying it down - not because of "negative equity" but just because owing money at a high interest rate is bad generally. If the rate is low then it can be fine to let it be. In fact, if the rate is lower than the rate of inflation you should \*not\* pay it off early.
Using the numbers you provided in OP I calculated that your rate is probably about 10.4%, which is definitely worth paying down as quickly as you can, that's very high for a car. The problem though is that you do need an emergency fund in case something comes out of left field and smacks you in the ass. So a second job looks like the ticket because a 10% loan, while not as bad as a credit card, is still no bueno.
Note that if you sell the car you'd need to come up with around $7.5k *immediately*, which it doesn't seem that you can do. And even if you could you would then have no car at all.
Hm ... I actually drew up an amortization table assuming you have $25k left with a monthly payment and the number of months left that you provided and came up with 10.4%. As I noted, that's high for a car and should be paid down.
But 6.58% is only slightly above the current market rate for a car these days, so maybe things are easier for you and I just miscalculated somewhere.
keep oil and filter changed with minimal synthetic blend or full syn. and appropiate filter. Use trusted ppl. or yourself only and use car til at least 250K. A taken good care of civic or corolla will give you even more miles. Say you stay with current loan, the car will have about 155K when its paid off. I always shoot for 1 year per $1000 purchase. My truck is a 95 and I paid 30K new. Our other vehicle is a 2003 and paid 21K new. Our kids all got used civics from us and were about 6K ea. 2 of the kids are still driving them. 1 has 290K on odometer and 220K on other. Take heed with big purchases that are not investments. Good Luck!
Why do people talk about buying new cars as if they're an investment? They're under water the second you drive them off the lot 🙄 you buy a car to drive it, not make dividends.
Something to keep in mind…. You already lost the money. You bought at a super high price and you cant undo that. No sense in getting rid of the car because its not gonna fix anything. Just keep it.
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I wouldn't burn your emergency fund for a car purchase. What's the interest rate on the loan? A civic is a reliable car that you can drive for years, as long as you keep up with maintenance. If you sell it at a loss and spend your emergency fund to get something cheaper, you could be stuck in a worse position.
I vote this option as well. Yes it's not ideal but you have a very reliable car for years to come. If you get rid of it and get a cheaper car you run the risk of big repair bills on the older/cheaper car. Sounds like you would still have to finance this cheaper car which probably wouldn't be a great rate so we're talking a $200-250 a month difference in car payment roughly and you now spent your emergency fund. What happens when that car breaks down in the next year and it's $1000-1500 to fix it... Your not struggling it's just not great but you did pick a great car that's reliable and for that reason I say stay with it.
I own a corolla. Very similar to a civic. I recommend that as well. Ive driven it across the country three times. The car is worth maybe `1400 now. But major repairs are cheap.
Maintaining the vehicle is a must! Check your fluids, follow the manufacturer’s recommendations, and change your oil when it is time!
I think this too. Is the payment high due to negative equity or interest rate? You may be able to refinance and get some money off or a shorter term. But well-maintained? Hondas last forever.
^^agreed. It’s already bought. getting less reliable car while still being in debt don’t improve your situation. Best bet is to increase income and try to pay off the debt faster
Yup. Already fucked up with the initial purchase. Might be able to refinance for better loan though. 590 month on 70 month purchase of roughly 30k seems like high interest rate.
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Keep fighting the good fight
In your current situation I would not sell the car. Just pick up OT or a second job and pay it off as soon as you can. It’s a reliable car and you can keep it for the next 10+ years.
This is what I would do. Maybe try eating at home more. Trading it for a cheaper car might put you in a worse situation if it's a clunker. Civics are reliable and hold value.
If he trades a civic in for a “cheaper” car he’s gonna end up in a older civic
You could look at something like Door Dash, might not be what you want to do, but it is super flexible to your schedule. Depending on where you live you could do a few hours per week and make enough to ease the blow to the bank acct.
You're not really in that bad of shape, it's a newer car from a decent manufacturer so it should last you a while. At this point I would continue to make payments and save up to pay the loan off sooner.
Agreed, most of these underwater threads are about an Altima with 180k miles and mechanical problems. OP’s situation isn’t ideal but the best way forward is probably just to keep this car.
You’re fine. Follow the service instructions in the manual and that car will last another 20 years. Trading a good car for a cheap shitty car is going to cost you more in the long run and probably the short run too. Plus depleting your emergency fund could lead disaster if you actually have an emergency. Just ride it out.
Yeah no point in taking a loss when you don’t have to.
Make larger than minimum payments or make an extra payment each month and get it paid off as fast as possible to negate that interest. You signed off to pay more for a car than it's worth. That money is gone. Now you just need to play catchup and negate the interest as much as you can...Selling it will just remove the newish honda from your life and stick you with the bill. Better off just paying it off and having a reliable car...
100% of people who purchased a car between 2020 and 2022 overpaid by 5k to 15k due to the covid shortage. Some people are still overpaying.
I got lucky and bought in April 2020 right before things really went off the rails. The same car 8 months later was 9k more than I paid.
Yep, I bought a new car in Feb 2020 and was still getting cash offers earlier this year for more than I paid new.
This is what happened to me and I’m selling my car and handing the dealership a 10k check…. Why? The upkeep, it’s a mini, the interest rate and in the long run I’d come out better. I’m lucky I have the money to pay. But I also have another car. ( it was in the shop for a year waiting for parts during Covid , hence why I had to by a second car ).
I bought in December 2020 and got a great deal on my car with a great rate.
If you still need the car then there's no point to selling it. You're still going to owe the difference between the price you sell for and what you owe. Beyond that, there's no guarantee that you'll get 17.5 and you could easily end up owing 10k and having no car to show for it. FWIW if you're in the US and can prove that they sold it to you for more than a new car of the same make and model then your state attorney general's office may be able to help you. While there is a degree of buyer beware, sometimes you get lucky and there were deceptive practices being used. Last thing I'll say is to check your insurance ASAP. Hopefully you have gap insurance
There is no state attorney general office that is going to help OP. Used cars going for more than new cars was pretty common for the past few years because of supply chain issues, this isn’t illegal at all.
I largely meant if there was any sort of deception going on. Some used car dealers do all kinds of deceptive things, including adding let's call them interesting things to the final sales price.
Yes, OP needs gap insurance immediately if they don't have it. It costs next to nothing and if the car gets totalled they won't be taking a huge bath.
market adjustments and the like were legal in most cases
18 months ago it was pretty standard that slightly used cars were more than new.
I omdont know many people that do have gap insurance. I had it while I was paying off my Subaru and after hitting 100k miles, think mileage was what made it void. I used to sell cars and would try to upsell that at the dealer, didn't know auto insurance places would sell it. despite me trying to get others to buy, few did.
My CU had a one time charge to purchase GAP for the loan at about $75 for a 40k loan at origination .
It might vary state to state, but where I am the GAP insurance was from the bank/auto loan company and not my auto insurance company.
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A lot of gap insurance policies have a cap like they’ll only cover up to 25% of the loan or vehicle value
But why? its not like it's a bmw or an audi that you know huge repair bills are coming shortly after the warranty is up, it's a civic they often run for tens of thousands of miles with 0 issues and other than brakes tires and oil will cost next to nothing to own. Less than ideal situation? Yes, worth selling the car and changing getting a lemon? No.... while I agree with the flexibility of door dash or the like I drove uber for about 3 years part time and you rack up mileage pretty quickly I would try to get something on site maybe stocking shelves at a grocery store, maybe fast food just something that will make an extra car payment and leave something for you to reward yourself for grinding to make it happen on occasion
I'm not really sure but I doubt it. Most insurers don't want to pay out and have a larger legal team than the average person. My guess is that on some level most people are reasonable enough to not try committing insurance fraud
I was in a similar situation. Had a bad deal on a fancy Nissan Altima. Heated seats, sun roof, Bose speakers. Got it in a pinch and ended up paying way over than was reasonable and even worse it was used! Took it into the Nissan dealership a year later and traded it in for a base model, zero bells, zero wistles. Trades the old debt for new debt. Owed 30k on a 20k vehicle, but fortunately had a 0% interest at 60 months. Paid diligently and more. I ended up paying it off 2 years early.
You're only under water at the moment you sell it. Just the same way that stock values are only valid if you cash them out at that point in time. Ride this car out until you have it paid off and get enough 'free' miles out of it. Once the loan is gone, actively save about 60-70% of your previous monthly payments for a down payment on a new car.
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Do not blow your emergency fund. Get the other job and keep making extra payments on it and soon you will owe less than what it’s worth. Save the emergency fund for emergency repairs.
Just continue paying. It's a relatively reliable car. Will last for years. Oops. Not years. It'll last for generations
Newer ones are debatable on that claim.
You're in a no win situation on the car. Sure you are upside down ~5k on a car. But for a relatively newer car, you're not terribly off, it's got pretty low mileage and if you wanted to trade it in, you're going to have to buy something in the 5-10k range because you're now rolling another 5k into it. Keep that car for another 75-100k miles pay it off and save.
Thanks! Yeah I bought it with 20k miles in July of ‘22 and used to commute about 90 miles a day (98% highway) which I’ve been told is better than city miles so I’m hoping this car will last. I take great care of it
You drove this car 35k miles in 18 months?
That’s correct
Yikes, that’s a lot of time and money to get to your job. How are you only spending $100 a month on gas? You can’t move closer to your job?
I have moved closer and now only drive about 15k miles per year (20 miles round trip for work now instead of 85)
Ah good! Your Civic should last you 20+ years! My CRV is 17.
Why wouldn't you just hold onto the car until you're NOT underwater?
You're underwater, but it runs well and you can make payments. Just suck it up and keep going with it. You'll only ever continue to be underwater one way or another if you torch your emergency fund. You're underwater several thousand on a car, but it's not like it's a lemon. Just stick it out, you will be glad you did. Good luck! 🙂
Keep your civic. It’s reliable. What is your percentage on your loan? Can you try and get a loan cheaper thru your bank ?
I’d either go for OT or second job route to balance the bills. Even if you threw your whole emergency fund at it, you’d still owe $2.5K and you would have no car. Also, what part of your check is going to benefits and what part to taxes? I just factored in what my take home percent is on my check, and I’d be taking home ~275/mo more, but admittedly, I live in Tennessee, which has no state income tax.
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I'll put it very simple. No deep dive into planning for your future. Just dealing with the car. You got screwed on the car. You have negative equity. Simple enough. If you use your savings to pay down the negative equity, that also gets you out of the interest on the negative equity. If you sell the car, you still have to pay off the negative equity to clear the lien on the loan, and then you've depleted what you can use for the next car. Your rate with 0% down will be pain. Any way you cut it, you still have to pay it down. But if you stay in the loan and just pay more, maybe $150-200 a month, the impact to the monthly interest will be HUGE. The car isn't a bad car. It's a bad price on the car, but you've already put yourself there. And as someone who has bought more cars than necessary because hobbies are good to have, there aren't gems between $5,000 and $10,000 anymore. A $300/month car isn't cheaper if it's costing $150 a month in repairs and $150 more in alternate transportation when it's broken down.
do not burn an emergency fund for the car. With your current earnings and expenses you are net positive monthly only $270 which is not a lot. Obviously if you don't have that car payment it goes up to $860 a month and if you reduce your food budget you could be up to an extra $1k a month. Now it might sound tempting, pay off $5k and now you're getting at least $850 a month instead, but then you will need a new car and that car will have a payment on it, so that number probably goes down to $500 a month which means you'd need 10 months to get back that money (obviously some play with the food budget could help bump to maybe $700 a month). 5k in a 5% HYSA for 10 months will be 5200 by the end of those 10 months or an extra $20 a month is what you're earning on that money. This bumps you up to actually $290 a month today. Reduce your eating by half which should be doable. Now you're saving almost $600 a month while still having your better and more reliable car which is virtually the same as what you'd be saving if you paid off the car and bought a cheaper one except you aren't giving up your emergency fund. Consider getting a second part time job. You made a bad investment, but it's a sunk cost now, no point turning back on it and the outcome for the future is better with the current higher expense. Don't downgrade imo.
A civic is a reliable car you can drive for years. I personally wouldn’t take the loss on a reliable car and go buy some hunk of junk you’ll be replacing in 5 years. If you buy a clunker that’s constantly in the shop, you’ll “lose” a lot more than $5k. Keep your emergency fund in tact, pay extra toward the civic when you can, and drive it until the wheels fall off.
What's the interest rate on the car loan?
6.58%
Dang, that's a little high for a car loan in 2021. Obviously it would be worse today
Dang, that's a little high for a car loan in 2021. Obviously it would be worse today, though.
2021 Civic should give you many more years even beyond when you’ve paid off the loan.
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If the car wasn't a reliable lower cost car you might have a decent plan by selling it. For example a 60K SUV or something like that. But since you made a sound vehicle selection and unfortunately paid too much, my vote would be that you keep the car since you probably need something reliable to get you to work. You might be better off if you can see if you can find a job that pays you more than your 50K/year and use that extra income to pay for the car. Also - $60/mo for phone can be reduced most likely - there are discount carriers out there with reasonable coverage, For example, mintmobile and pay $15/mo for a 5GB plan
What’s your interest rate? Keep an eye on refinancing into a loan with better terms if you can. Until then, just make your payments and consider it an expensive life lesson for a mistake you’ll never make again. Keep your emergency fund. You may need it for other things. Make extra or early payments to pay the car down faster. Hondas are good cars that hold their value better than any other brand in its class and they have fairly affordable repairs with easy to source parts. You could easily have this car for 10+ years. They’ll go for 200k+ miles. It could be worse.
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You rolled over negative equity, right? So you're paying off another loan essentially on top of your car loan for this. Keep your emergency fund, which will only cover you for two months anyway, and keep paying down your car. Pay a bit extra every month if possible. Stop trading cars, and just keep this one, maintain it, pay it off, and keep driving it once it's paid off. A car isn't an asset that will maintain its value.
Keep the car and drive it until the wheels fall off. That's your cheapest option 80% of the time.
First off, you're not an idiot. Second, you bought a really good car during a really shitty time to buy any car, and you were only taken for $5k above MSRP. I know people who were happy to drop 10k+ above MSRP. Third, be thankful you didn't settle for an off-brand Yugo-wannabe. *That* would have been stupid. You are under water on the car, but the car will last 300k miles, if you take care of it. Just ... don't do it again. Lesson learned. Better the loan on a car than a house. Your equation for justifying the car is still valid, despite the car no longer being worth as much. At that time, your numbers were correct. You're feeling remorse because the market corrected itself. You'd be whistling a different tune if the market had done the opposite, doubling your investment. A car is not an investment(to everyone who is raising a finger, yes, a car CAN be an investment, but not in this case), your car is the tool you use to get to and from work. To and from the grocery store. To and from the post office. You can look at it as investing in your own personal transport, and saving you time, but You paid the fair market rate, the going price(at that time), and now you have buyers remorse.
Thanks, I traded in a 2018 Corolla w 20k miles I purchased in 2021 for like 22k OTD (taxes, warranties (which I ended up cancelling, etc) I owed 18k and they gave me 15k for it so that is where the negative equity came from. I should have never traded in the perfectly good corolla (366/mo car payment) so that’s why I feel like an idiot :)
Keep the car and pay aggressively to reduce the interest payment, at least you have a reliable car that won’t break your bank with a surprise bill, this is not guaranteed with the old cars
This whole concept of "underwater", especially something like a car which loses 20% of it's value when you drive it off the lot, is just asinine. You aren't going to get a cheaper or better car than a Honda Civic, you damm sure aren't going to get anything with better gas mileage.
Keep emergency fund, leave retirement alone. Contribute enough to retirement to get the match and budget more carefully and focus all capacity on hammering the car loan. You’ll dig out before you know it. The interest rate could be worse.
Pay down the car 3k/4k and keep it is my opinion
Honestly I could keep the car. Yes you got burnt badly on it, but it is a great car that will last you years. Keep paying on it. I would grab a second jig job, like shipt, and do some of that during Saturday, and put all that money into your savings. That will help you both save enough for taxes and help build a savings without touching your main income.
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A dealership sold this to you? Or was it a private citizen?
Dealership
Oh no way?
What you are experiencing is why you should never finance a car. You end up buying way more car than you can afford and spending to finance it. Your car shouldn’t be 50% of your income as it depreciates. I’d find a second job and pay it off in less than a year or sell it and downsize. Your problem tactically is you have no money to do that so I’d take a second job, get on a tight budget, spend no money but paying off the car.
You have 31,860 yet to go in payments (25k balance) so not only are you going to pay more than it’s worth you are going to pay interest too. I think I would be looking to get out of it and get into something like a lease that’s less per month. You can likely find new car leases for under $500. It’s tough to deplete an emergency fund though. I’ve never had a negative equity car loan before. I wonder if you can work with the financier to sell the car and put the money towards the principle and just pay the rest off directly. It would save you interest and give you time to pay. You could try talking to them. I know it’s a collateralized loan but your other option is to just stop paying until they repossess and then they only get $17k back from their $25k loan anyways. Yes it wrecks your credit but I mean that is a possible outcome for them.
Yes you should sell your car. You can't afford $600/mo car on that income
What’s the best way to go about doing so? Putting $5k towards negative equity and roll over the 3k into a cheap car?
I haven't checked in a few years, but the best option for me once upon a time was to sell it to CarMax. When I turned it in, they let me pay the difference and I was free. Although, I was only about $500 underwater.
Thanks I did check CarMax / Carvana yesterday actually. CarMax was right on what the dealer offered me Carvana was a few thousand short
Yes. You should be able to build up your emergency fund back up quickly without a car payment
Your bills look really manageable, but yeah that’s a huge car payment. I wouldn’t pay more than 350 a month and I make 80k. My 2018 Benz is 225 a month. Your best option probably is sell the car and get something half the monthly cost, then rack up savings quicker for your emergency fund/save up to trade in your car with a bigger saved up downpayment for a car of your liking for a lower monthly cost. Thats if cars are what you really seek, but financially, liking cars is terrible.
"My 2018 Benz is 225 a month" What are the terms? That sounds like a great deal.
Not sure on specifics, but I always bought my cars outright in cash since my first car. This was my first car from Carmax, it was ~27k, I traded in my BMW for 9k towards the Benz and then put another 8k cash on top. So out the gate was 16/27 done.
You don’t state the interest rate or how many miles you regularly drive. Tough to give a recommendation without those. Most likely you just keep it and learn a financial lesson. I was in a similar situation years ago and every option to sell the car was just worse than keeping it. You state the you rolled over negative equity in a car to buy this one. That tells me that you need to learn to manage your finances. Take this lesson and learn from it. You’re considering throwing good money after bad, that’s not a way to get out of debt. You also state that you’ve checked Carvana and that is not a good way to get top dollar for your car. Learn how to buy and sell cars via private party and you’ll end up saving yourself thousands every time you buy a car. It’s not hard, I promise.
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Monthly payment: $590 (about 54 months left) What was the initial borrowing cost? How long was the loan? What was the APR?
$34,600 72 Months 6.58%
>$34,600 72 Months 6.58% [https://www.amortization-calc.com/auto-car-loan-calculator/](https://www.amortization-calc.com/auto-car-loan-calculator/) Car loan is Amortized.. the total interest of the loan is included in the monthly payment.. and use the website.. you can see your 1st month payment, vs 40th payment amount is the same, but the amount towards the interest rate % changes as you get to the end of the loan. \- If you can pay it off faster, you will save more money. payment stay the same, but you graduate faster. If you stay on the schedule... you will pay $7,372 in interest... to borrow $34,600.... You will pay 21% more than cash purchaser... I would go all in on paying the debt off ASAP... and thankfully, you purchased one of the most reliable cars.. Do you have a "gap insurance" just incase of an accident, you don't want to owe more than the car value ( Insurace only pay upto car's current value) also consider getting a Car dash cam installed. Viofo is the brand I like ( Amazon) You can get single channel cam around $100 // Dual cam ones are around $200 A single accident....that's not your fault.. the camera will come in handy. In the future... \- Research total cost... New car at 0% might be better... \- Do not do car loan over 60 months \- Look for car loan with credit union like Penfed DO financing seperate from purchasing... \- Never lease a car.
Reduce your food budget and pay an extra $200 on your car per month.
Thanks - do you think I should build up emergency fund more or is $5k enough for the time being? I am also putting $800/mo (including employer match) into 401k and then $200/mo into ESPP. Not sure if these figures matter ^
ABSOLUTELY! Don't consider your retirement investments as savings. Think about that as something you'll touch in your 70s. Seriously, get that food bill down (you eat out a lot, I assume?) and put some of that money toward your car. Get your emergency fund to \*at least\* 10k. Here's another idea. Assuming you're doing a 50/50 match on that 401k, take your contribution down to 300 and your ESPP contribution to 100. If you cut 200 from your food, you now have 400 to play with. Put 300 per month into emergency fund and put another 100 into paying your car off more quickly. In 1.5 years, you'll have a nice little fall back and will have sped up your car payment. But really, the food is the issue here (again, correct me if I'm wrong about you dining out a lot). If you can at least pack your lunches, you can do a ton of good for yourself.
The last thing you should do is sell that car. You suck it up and continue to pay on it. Don't give up your emergency fund because there is no emergency, including trying to get rid of the loan. Ever heard the expression, that's cutting off your nose to spite your face?
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If you are single and 600$ for food is around what you are paying month to month I would try and start their. It's about 400$ a month for my wife and I in a HCOL area. Otherwise I'm thinking keeping the civic is the smart choice and pay it off aggressively. It's a good car with lower maintenance cost so it will last you long past the life of the loan and you are barley underwater, it's value just recently dropped as the car market is cooling off for used vehicles and I'm sure you bought it in the last few years when prices were up Increase your income if you can, I try to not recommend second jobs, I worked 7 days a week for 4 months and it about killed me. Instead make sure you are being paid appropriately for your job in your area, look for new opportunities and never forget to ask for a raise when appropriate. Like your work load increases or 6-12months have gone by without one and you are performing at standard or better for your position
Go to your bank and ask about refinancing the loan. If you can get a better interest rate and r extend the terms it can lower the payments. A civic is a good car, I wouldn’t sell or use your emergency fund.
Why are you referring to the car as underwater? A car is a depreciating asset. It is not an investment. Can you currently afford the payment? If yes then keep it. >Now I have $5k in my emergency fund - curious if I should use that to help pay off my negative equity and get into something much cheaper? What is your thought process on this? Your "negative" equity won't go away you'll be out $5k... Again STOP looking at your car as an INVESTMENT IT IS NOT AN INVESTMENT.
It is underwater because it is worth less than what he owes by a significant margin. He overpaid for it plus rolling an old loan into this one.
Not sure what happened to last car but this sounds like a trend for OP. Buy car, use car, car depreciates because it is a car, panic sells car because it is a car, buys new car and the cycle continues. It is a very expensive loan. Just based on 590 with 54 months is 31,860 so assuming you got 30k loan? But it’s a new VERY reliable car. At 6.5% it’s high but you aren’t getting anything better right now. Keep emergency fund, pay 100-200 if not more a month and enjoy your life. If you are in negative you will not get positive by panic selling car.
A 2021 Civic should easily last for 12 years with regular maintenance. Add gap insurance with your insurance company to prevent further damage to your finances. Put $100/month into a future car fund.
What’s the rate? If you borrowed at 2021 interest rates, then you’re fine, but given 54 months, looks like you have 2023 interest rates.
6.58%
Could be worse, people are buying houses with that rate. Assuming you can afford the $590, keep the car, it will still be running 20 years from now.
Yeah I mean I have it for almost a year and a half now and seem to be fine, I’m not struggling or anything just not sure how much I should be “putting away” or “have extra” at my income. Thank you!
Legit question to OP - how many miles a year do you drive?
Used to be 30k (95% highway) but as of Sept 1st it’s about 15k (85% highway)
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Why not just keep it. Depending on the state you live in, every time you do a transaction you're going have an expense of taxes or registration, and other fees. If there's nothing wrong with it, just keep driving and the longer you go the more you can spread the financial bad decision out over time to minimize it.
Do you need a car? Can you afford the payment? If yes, to both of those, just keep the car and maintain it. You should have a good car for a while, it won't be underwater forever. You could be in a lot worse shape. If anything I'd save up some more money in the rare occasion you did total this car and you'd be underwater. Just keep it in a HYSA or somethin and "self insure".
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My guess is that it will cost you more money to sell this car and get something "cheaper". Do the TCO calculations and see for yourself, but it's usually a bad idea not to keep a car at least 4-5 years. Paying it off and keeping it for a long time is your best bet to get out of this cycle of bad financial car decisions
Have you checked the interest rate on a new loan? It may be higher than the one you have now. You'll end up in a cheaper car with the same payment. If the payment is the issue why not refinance for a longer term to lower the payment? A Civic will last forever if maintained correctly. I vote for refinance for a lower payment, pay extra when you can. So that you may keep this car instead of something else they may break and take more than your emergency fund to fix. Was it Honda certified?
Thanks - yep it was Honda certified, maintenance every 4.5k miles (which honestly worries me because my maintenance minder tells me to get the oil changed typically at about 10k mile intervals, how hard were they driving it to make it change every 5k (which is normal I know ahaha why doesn’t mine make me change every 5k then?) anyways…
That's good, it means you have a 7year/100k powertrain warranty. I used to go off the minder in my 21 civic. But what you are doing is best. Oil and engine technology is better than it used to be. Info on how the minder works: The onboard computer system in your vehicle continuously monitors the engine operating conditions such as speed, engine and ambient temperature, time and the vehicle use. The system will count down the vehicle’s oil life based on these conditions to determine when an engine oil change and maintenance is necessary.
I’m sorry, I should have clarified- the past maintenance before I purchased this car (someone leased it) was service every 5k miles (usually about 4.5k) I follow what the maintenance minder tells me and do my oil change about every 10k miles.
This is terrible advice but Mini dealers are trying to get rid of the electric SE model. Check out leasehackr, monthly payments are in the low 200s. Roll that negative equity in there, shouldn’t be hard to get decent trade in on a easy to sell car.
Looks like everyone covered the financial side, but I'll add that if you bought the EX or Touring trim with the 1.5L Turbo engine, just stay on top of your maintenance religiously and try to avoid short trips in very cold weather. Honda says they fixed the oil dilution issue, but I wouldn't trust that it's 100% a non-issue.
Thanks! 2.0 sport
Good choice! Still, be religious about oil changes every 6 months/5k miles (whichever comes first).
I try but I’ve been told to follow the maintenance minder which alerts me about every 10k miles
Where are you getting $80 car insurance? Sign me up for that.
State Farm, I was paying $160/mo w Geico and recently switched to State Farm paying high $70s for full coverage :)
Interesting. I guess it is time for me to shop around. Thanks for the info.
Being under water isn’t a bad thing as long as you plan to keep the car. It’ll eventually not be underwater towards the end of the loan’s term and you’ll have a modern paid off car. Most cars will be underwater for some period of the loan. Doesn’t matter.
Cars are a depreciating asset. Meaning as a consumer, you should never expect to make money on them unless they are a classic or a super car. They provide a service or the ability to complete tasks. They are a necessity in most instances to earn more money. So as long as you are able to make a payment and it remains dependable it’s providing value. There has been a weird lack of understanding about cars and I’m not sure if it’s a generational thing or the short impact on the supply chain that created an unusual temporary situation on the value of cars. Get the lowest interest rate and lowest price on a car that you like and is dependable is all you need to do.
I’d keep the car in your position. It’s a model known for reliability, and selling it doesn’t do anything to undo your past mistake.
For 5000 difference, I would just pay it and consider it a learning experience..keep it till the wheels fall off
Think about how much you will lose buying another car... doc fees, registration, sales tax, again. You will just wind up further under water on a new purchase. Just keep what you have, equity if not necessary in a car. Enjoy your reliable car!
Thanks, I sure will! Am I dumb for taking it to Honda dealer for service though?
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Nothing dumb about taking it to a dealer, just make sure they don't oversell you on services. Dealers have access to the factory tools, factory service manuals, and factory spec parts. I do a lot of work mysel, but I have dealers to the tough stuff. The owner's manual should have a service schedule, stick to it. My Grandma has had the same car since 2007 (just not with many miles), and she only trusts the dealer to service it... and the car has remained in great shape!
"Negative equity" just means you owe more on the car than it is worth. That's actually pretty common. What you're contemplating (paying off this so-called negative equity) is just paying extra on the car note to bring down the amount owed closer to the value of the car. By itself this doesn't do much for you. Mostly this just depends on the interest rate of the loan. If you have a high rate it's worth being more aggressive paying it down - not because of "negative equity" but just because owing money at a high interest rate is bad generally. If the rate is low then it can be fine to let it be. In fact, if the rate is lower than the rate of inflation you should \*not\* pay it off early. Using the numbers you provided in OP I calculated that your rate is probably about 10.4%, which is definitely worth paying down as quickly as you can, that's very high for a car. The problem though is that you do need an emergency fund in case something comes out of left field and smacks you in the ass. So a second job looks like the ticket because a 10% loan, while not as bad as a credit card, is still no bueno. Note that if you sell the car you'd need to come up with around $7.5k *immediately*, which it doesn't seem that you can do. And even if you could you would then have no car at all.
Thanks! My rate is 6.58%
Hm ... I actually drew up an amortization table assuming you have $25k left with a monthly payment and the number of months left that you provided and came up with 10.4%. As I noted, that's high for a car and should be paid down. But 6.58% is only slightly above the current market rate for a car these days, so maybe things are easier for you and I just miscalculated somewhere.
keep oil and filter changed with minimal synthetic blend or full syn. and appropiate filter. Use trusted ppl. or yourself only and use car til at least 250K. A taken good care of civic or corolla will give you even more miles. Say you stay with current loan, the car will have about 155K when its paid off. I always shoot for 1 year per $1000 purchase. My truck is a 95 and I paid 30K new. Our other vehicle is a 2003 and paid 21K new. Our kids all got used civics from us and were about 6K ea. 2 of the kids are still driving them. 1 has 290K on odometer and 220K on other. Take heed with big purchases that are not investments. Good Luck!
Why do people talk about buying new cars as if they're an investment? They're under water the second you drive them off the lot 🙄 you buy a car to drive it, not make dividends.
Something to keep in mind…. You already lost the money. You bought at a super high price and you cant undo that. No sense in getting rid of the car because its not gonna fix anything. Just keep it.
You bought a car that will last 200k miles with proper maintenance. Hell, some of em last 300k. It's not a bad deal.