Pay down current car and trade in or use cash as down payment?

Look up the sales tax rate where you live. For me it’s 7.5%. Trade reduces tax liability, so in theory, in my case
The dealer can offer 7.5% below private party value and it’s a wash when compared to selling private and using cash at the dealer.

 

Old math. Sorry. It’s a nice philosophy to go by, and I get that. But when you can get notes in the 0.9% - 1.9% range, your money makes more for you when invested. BIG caveat.... when invested.

There is of course the security of having a lump in the bank too. BIG caveat... keep it there.

I personally sit in the middle. I don’t take a payment over $500 for 42 months. If I can’t put down enough cash for that, then I wait. That means I never owe more than $20k on any car we purchase.

Affording a car is based on cash flow not necessarily what’s in the bank. I totally understand the advice to someone young though. It’s a philosophy of purchasing, and of course will result in less purchase over time. Not a bad thing.

 

A paid off car is cheaper than a car with payments. Dude drag your feet, pay your shit off and ride it into the ground. Save the cash and buy your truck outright with cash

 

That works too! It's almost always cheaper to repair a car than to take on 4 years of payments.

 

Unless they give you better than KBB for your trade and miss the busted condenser unit on your trade in that is a 1200 dollar repair... then you’re up a few grand.

Big reason why I pulled the trigger on my Taco

 

I’m not a millionaire, never have been and I’ve never bought a vehicle I didn’t have the cash for.

I’ve worked since I was 14 and actually bounced between 3-4 jobs 60-80 hours a week to pay cash for my Tacoma.

I also don’t have a dime of student loan debt despite having graduate degrees.

I’m not the person to convince hard work doesn’t pay off and you can’t have what you want without debt. I know thats false.

The only reason why I have the cash I do is because I don’t carry debt. I don’t have car payments or credit card payments shrinking my income.

You do NOT have to buy a new car and you don’t need to buy a $35-45k new truck. Everyone can find a used car they can pay cash for.

Your comment about real estate. Real estate is an appreciating asset, not a depreciating asset like a vehicle.
I have a mortage but a 15yr fixed that yes I will pay off and hope to pay cash for my next one.
I can afford to make triple payments because I don’t have a car payment. I also did not over buy in a home. I bought below my means.
A paid off house is my ultimate dream.

I’m not saying this to be snide but to be honest. Debt is NOT a necessity in life.
No one should ever go into debt over a vehicle because of risk. When life doesn’t go your way life is going to be a lot worse when your car is repoed. No one should ever have to go through that.
Hard to find a job without a vehicle.

The Camry is a fine car. He can pay it off and stash the cash for the truck. The holidays are coming up its a great time to get another job and work to the bone to pay for it.
There also exists a lot of great used 2nd gens he can put the cash up for. Zero reason to believe debt is a necessity.

I want a Cummins or F250 Lariat Diesel that runs about $75k OTD. One day I will, its just not going to be today.
I make decisions today that will lead me to what I want tomorrow.

If you want something... go get it. Don’t whine the man has you down.

 

The key is how long you own it. OP and a lot of guys might never buy a truck if it required paying cash. I’d rather buy a brand new Tacoma and drive it 10 years or more than play the I’ll buy something cheap (and used, probably very used) every few years. Again if you get the new itch to often then yes you will lose.

 

This guy is just financially smart. I’m not plugging Dave Ramsey but if someone followed his advice @PackCon would sound more believable.

 

He’s upside down, what money?

 

The dealer always wins... it just depends on how bad they want to <moderator edit> you!

 

According it KBB on the most average 2012 Camry I can find, 70K miles, standard features LE Sedan, the private party value is approx $9,500 to $10,500 with trade in being about $2K lower.

Facts.....you don't have title in hand or $8K to pay off what you owe.

That means you will not likely be able to sell Private Party.

Options:
1. Pay off Camry first, get title and be able to shop at your leisure.
2. Trade in, hope to get enough to pay off your Camry. In this case consider financing the whole thing. The $3K you saved is not going to make a big dent in the grand scheme.
3. As others have suggested, not having a Camry payment will allow you to save up cash very quickly. You can wait until you have 25% to 50% down.

 

Drive the Camry for 4 more years, and bank more for the truck.

 

I did that when I sold a motorcycle. Worked out fine.

 

It's been a while since I've sold a car but when I did just signing the title didn't mean it was in that persons name. They had to go on their own and pay taxes and transfer title. Sometimes it could take years of them driving a vehicle still in your name.

 

Doesn't the buyer pay the tax?

 

I didn't mean he is prohibited from selling private. I meant it's a pain in the ass.

I made the assumption that most buyers won't want to deal with that unless they are getting a deal which defeats the purpose of private party.

You made the assumption his bank has a local branch and is open to helping. Some banks really suck these days.

 

In Texas, they passed a law penalizing anyone who does not pay the taxes and register within I think 90 days.

Can't remember the details, but it closed a loophole.

In my county, the Tax office employees ran a scam to reduce the sale price and pocket the tax savings

 

This is why I say if you can have the dealer process it all it's much less headache.

 

I can agree with everything you said, and assume your advice to his was regarding his decisions.

In my case paying $35k cash when I can finance at 1.8% does not make sense. I can always change my mind and pay it off with cash.

I gain more that 1.8% on investments, and inflation will increase more than that over the term.

Still agree with you though. It is the best advice for OP.

Still, speaking from the heart....you can't take the money with you, so live a little if the risk is not too great.

 

I trade my trucks in BUT I don't let the dealership lowball me. Do your part in research, print off 3 separate values from KBB, BlackBook, Whoever else you want to use. If there's a CarMax nearby let them bid on it, that'll give you the most accurate value. Add $1000 to that and stick to your guns and hold firm. Every time they lowball you, you lowball them on the price of their truck by the same amount. Dealerships are fun to mess with! I enjoy it actually. Only because I know how to play the game and never allow them to wear me down. Don't let people rip you off, just because they offer something doesn't mean you have to take it.

Oh and I never put money down on a vehicle. Screw all that. I use my trade in which is always plenty of equity in my experience. Buy gap insurance though, but don't pay more than $399 which is what my credit union sells it for. If the dealership will match it, fine, if not then their loss.