Does It Make Sense To Trade In my Car?

Hi,

I have a 2008 Nissan Sentra that i bought brand new. The monthly payment is $260 a month with an interest rate I believe at 3.5%. Ideally I would like to lower my monthly payment to $200. I currently have $9400 left on the loan and the car is valued at around $10,000 by KBB.



What I want to know is if I go to a dealer is it possible to get a 2006 or 2007 model of a good used car and eliminate my loan and lower my monthly payments?Does It Make Sense To Trade In my Car?
Hang onto that Sentra. We've got a 2004 Sentra with 100,000 miles on it. It still lacks a year being paid off (because we bought used, as you're thinking about doing) and our payments are $264 per month. We traded a car that was worth slightly less than what was owed, plus the dealership took us to the cleaners on the trade-in allowance they were willing to give. You'd likely face the same situation. KBB is the highest value of most automobile buyer's guides. The others, such as NADA and Edmunds.com's "True Market Value" tend to be lower. Expect your dealership to offer you as little as possible.



You're in a pretty good, fairly new car that should last a long time. If you want to pay it off early, call the finance company and see what you can do about applying an extra amount (say, $20) to the principal balance each month. They might set up a plan for you to do that. If we weren't trying to buy a house right now, we'd probably just pay off the remaining $2,700 or so we owe on our Sentra. All we'd have to do is call the customer service number on our billing statement and work out a payoff amount.



At the very least, do this:



1. Hang onto your Sentra until you've paid it off more. You want to have positive equity built-up in this car, because that's what determines your trade-in value. As it is, you're barely breaking even ($0 equity) based on KBB, and you're probably "upside down" (less than $0 equity...i.e. you owe more than the car is worth) according to other buyer's guides.



2. When you've built up a couple thousand dollars of positive equity (based on NADA and/or other buyers guides like Edmunds TMV), do your research about how much trade allowance would be fair. You want to get your dealer to give you something between the stated trade-in value and the dealer resale value when you go to trade. Bear in mind, however, that the dealer will have to pay off the balance of your loan out of any trade allowance they give you. So if they offer you $8,000 and you owe $6,000 on the car at the time of the trade, you really only get to knock $2,000 off the price of the used car you're trying to buy.



3. Work out your financing ahead of time with your bank. Many banks will offer a fairly competitive car loan at relatively low interest rates (under 6 percent, currently). If you do this ahead of time, you can go into the car dealership and talk CASH PRICE, not monthly payments. This is the number one mistake many car buyers make. We made it when we bought my wife's Sentra.



4. Research the cars you're interested in. Find out the value, again utilizing several buyer's guides to determine a fair price. You're looking at the dealer retail value, but also be aware of the dealer trade-in values for the cars you're looking at, as well. Being that most car buyers are relatively uneducated about this process, you can usually bet the dealer paid less than the dealer trade-in value for the car. Not that they'll ever admit to it, but it's good to remember you might be able to buy the car for less than your buyer's guides' "dealer retail" price recommends.



5. Walk into the dealer with a fair cash price decided. Since you've already worked out the financing with your bank in a low-pressure environment, and you know what your payments will be for several "test" amounts, offer them your lowest price. Cash talks, and you-know-what walks. You'd be surprised at the deals you can get by utilizing this method. The salesman gets a clean commission check with nothing going to the Finance and Insurance guy, and he doesn't even have to do as much "car dealer math" on his favorite tool, the Four-Square Sheet. All the dealer has to worry about is whether they're making a fair profit on the vehicle. No F%26amp;I tricks, no need to distract you with monthly payments or special "paint protection" packages, etc.



I used this method to buy my truck, a 2006 Ford Ranger. I bought it in February 2007, when it had 15,000 miles on the odometer. Being a basic truck, without many options, I found it was valued in the $11,500 to $12,500 range, depending on which source I consulted. The dealer had it listed for $11,999 in a newspaper ad.



I arranged financing with my bank, and then called the dealer (a 40 minute drive from my house, so I figured it was better to call first.) They still had the truck, and if I was offering cash, they were willing to come off the price $1,000 immediately. I got the price down another $250 or so and then offered up my trade, a totaled 1994 Nissan pickup that still ran and drove just fine, for an extra $850 or so. It turned out they acquired this truck from a previous owner who traded it in on a brand new Ford Mustang, and I suspect had paid much less than the suggested NADA trade-in value in the process. That's why they were willing to sell it to me so far below the NADA and Edmunds TMV "dealer retail" value.



I came out of it with a very small truck payment, and a great deal overall. We will employ the same strategy when my wife's car needs replacement in a couple years.Does It Make Sense To Trade In my Car?
keep the car you have because you don,t know what your getting on the car market. if you want to lower your payments then get a loan against your car.Does It Make Sense To Trade In my Car?
You won't find the kind of deal you're looking for from a dealer. Look at the dealer trade-in value of your car on KBB. I think you'll find it to be considerably less than you owe on your loan. You'd be better off trying to sell the car yourself, then go shopping for a lower priced vehicle.



ADDED: When you sell the car, you'll use the cash from the sale to pay off your loan and obtain a release of lien from the bank. You'll then give the clear title to the buyer. Any cash you have left over after that is your's to spend on a new car, or whatever else you want to do with it.