06-20-2015, 05:33 PM | #1 |
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Early trade in on financed car
Hi
Does early trade-in on finance benefit the consumer at all? So let' say I plan to change car after 3 years and there are two scenarios: A - 4 year lease but after 3 years I go to the dealer to trade the car in. B - Finance for 5 years or so but then in the 3rd year I want to trade it in. I'm assuming from the trade in value there would be no issue but what benefits me more in terms of having positive equity in the car? My friend has 7 months left on the lease and went today to see what his options are with early trade in. The dealer estimated $6K negative equity. His total payments left would have been $4,600 only. Advice? |
06-20-2015, 10:10 PM | #2 |
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The only time it benefits the consumer is when you are getting a much more expensive car. They would then give you a fair deal because they will make a lot more money with the other car.
Other than that prepare to lose money
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06-21-2015, 08:44 PM | #3 |
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The above statement makes sense as it happened to me a few years ago. The dealer gave my trade-in better than private sale, plus 15% off MSRP on a F10, but when I went with F30 they dropped the trade offer by $3k. Naturally the old car was sold privately to avoid the rip-off.
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06-22-2015, 09:13 AM | #5 | |
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06-22-2015, 10:35 AM | #6 |
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The way compound interest works is that most of the interest is collected in the first third of the term. The amount of unpaid interest in the last year is usually slight. If you were to see a breakdown of what goes towards interest and what goes toward principle you might see that your first payment is 90% interest, while your last is only 1% interest. If you want to build equity the key to doing so is to finance for the shortest term that you can afford to.
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