Auto Loan

[Jfleenm16]

Hello all. I’m a new doc and new to the site and have a question that I think I already know the answer to, but would like some opinions and recommendations.

I just bought a 65k truck. Paid 10k down, got 10k for my trade. Financed 50k at 4.28% (5k more after extended warranty and 5 yrs maintenance).

I’m now regretting the decision after thinking about the 50k debt and the lost opportunity cost. I am thinking of eating the money I have already lost, selling the truck and buying a 10-15k car with cash.

The truck would sell now for 54k and I can get most of the 5k paid on extended warranty back.

I think that eating my loss and selling the truck would make sense, but wanted your thoughts. Just trying to make sure that I’m not missing anything before making the decision to sell. I can afford the payment, but at the point in my life I can also use more money in my nest egg.

Thanks

[Peds]

yup. consider it tuition in the game of learning.

also 4.3% is terrible.

[Dicast]

Maybe you have already made up your mind considering your buyer's remorse but a little more information may help the rest of us out. What is your income range? Any other debts? Net worth?

A 50k loan will make most people on here cringe but if you are debt free or have a significantly high income it may not matter as much in the end. You will be losing 11k in transaction costs on this deal plus the additional costs of purchasing the next car.  If you keep it you'll have ongoing depreciation over the next few years that could be much greater than 11k.

I would sell it if you are in any significant debt.

[CM]

Peds wrote:

yup. consider it tuition in the game of learning.

Click to expand...

Agree.

[Jfleenm16]

Thanks for replies. A little more info about my current financial situation. Annual income now is 90k after taxes. I do have 170k school loans, but am hoping to get PSLF in 8.5 yrs and currently paying via the REPAYE. Net worth is around -160k with the school and auto loans. Cringe worthy I know, but trying to straighten things out.

[CordMcNally]

You couldn't afford the truck when you got it. I'd definitely try to reverse the extended warranty. When you go to evaluate whether it'd be better to keep the truck or sell it and get a car, make sure you include any gas mileage differences and insurance premium differences.

[I Find This Humerus]

Maybe take the 50k loan and invest it to get more than 4.3% return?

[East coast]

What's your goal? Be out of debt asap and achieve financial independence asap? Sell the sucker and buy a cheap reliable used car.

If you like the car and plan on keeping it for 100k miles, then this will likely be a rounding error in your overall financial picture across your lifetime. (This assumes you don't make it a habit of spending $$ you don't have). My guess is you are worried enough about it that you won't fall into a trap of lifetime debt.

[Kennyt7]

Big mistake.  Buy certified Honda or Toyota and you have it for 15yrs

learning experience

you cannot afford this car

[Dicast]

Jfleenm16 wrote:

Thanks for replies. A little more info about my current financial situation. Annual income now is 90k after taxes. I do have 170k school loans, but am hoping to get PSLF in 8.5 yrs and currently paying via the REPAYE. Net worth is around -160k with the school and auto loans. Cringe worthy I know, but trying to straighten things out.

Click to expand...

Sell it. Paying off 50k with 90k annual is nuts. It is a good thing you are having buyer's remorse now and not 10 years from now.

I Find This Humerus wrote:

Maybe take the 50k loan and invest it to get more than 4.3% return?

Click to expand...

I think he repays the loan when he sells the car and has 9k left over. I can't imagine the bank not wanting their money when they are holding the title.

[wideopenspaces]

A 70k vehicle on a 100k income? That's pretty crazy to me. I'd sell. Your net worth isn't bad but it's going to be slow growing at that income level so I'd be shoving as much cash into retirement as possible.

[Hatton]

Hopefully just a momentary lack of discipline.  Sell it and plan to buy your next vehicle with cash.  If you pay with cash you can afford it.

[ACN]

Refinance with penfed for 1.5% auto loan and keep it. You're going to lose a lot on the depreciation of a new vehicle imo in selling it.

[The White Coat Investor]

Someone get Craigy in here so he can understand why I hate auto loans so much.

[hightower]

Agree with the above. But dont beat yourself up over it. Take this as an important life lesson. Follow the WCI rule of thumb for deciding how much car you can afford and always pay cash (or pay it off in a few months). No more than 20% of your salary on a car will prevent this from happening again. That means spending up to 18k for you. You can get a very nice car for that price, but pay cash for it.