Selling cars with finance

Ben73 · 09-10-2010, 07:41 PM

So I bought a car the start of this year, brand new. Big mistake. Regret it majorly.
I got a secured personal loan from a bank over a 4 year period.

Is it possible for me to trade in my car for a vehicle of similar value and just continue paying my loan off like nothing is different. Or would the bank not allow this.

I Could probably pay of the entire loan in less than 2 years instead of 4. But I want to pay it off over the entire 4 years because banks like to see that you have a reliable, steady payment, and not varying all over the place($700 one month, $2000 the next, $850 the next. Banks hate that stuff apparently.
I want a good record for when I buy my house. But I don't want to keep this car for another 3 years.

Any advice appreciated.

302 XC · 09-10-2010, 07:46 PM

Best bet contact your finance company
Each have different rules/rulings regarding this

Kryton · 09-10-2010, 07:52 PM

Quote:

Originally Posted by Ben73

I Could probably pay of the entire loan in less than 2 years instead of 4. But I want to pay it off over the entire 4 years because banks like to see that you have a reliable, steady payment, and not varying all over the place($700 one month, $2000 the next, $850 the next. Banks hate that stuff apparently.
I want a good record for when I buy my house. But I don't want to keep this car for another 3 years.

Any advice appreciated.

Dont know where you get your advice from but its time to start listening to someone else.
Banks dont want you to pay your loan off quicker - that way they get more money from you, in the form of interest.
If you pay the loan off quicker, youll pay less interest and you'll look better at the end of it.
You can demonstrate that you can handle a loan, you can pay off comfortably and more quickly that needed - thats a good thing.

You do need to speak the financier as you pretty much now owe more than the car is worth.

**Professor Farnsworth** · 09-10-2010, 07:59 PM

a car yard will do an encumberance check on any vehicle offered for trade. Once it says encumberance applies, they will tell you to make the arrangements before they will take it.

speak to your finance company

Rodp · 09-10-2010, 08:27 PM

Can't think of any bank that would allow you to pay off a secured loan on a vehicle that you no longer own.

You would have to finalise that contract, make up any shortfall if required and re-finance the new vehicle.

As for history, provided you're meeting the minimum required payments on your loan and don't default then you're building a good credit history.

Scott · 09-10-2010, 08:44 PM

If the vehicle is the security then you will need to settle it. Many car yards are happy to pay out your loan and give you a new one to sell a car - it is very normal practice.

You will however need to ensure that the deal they do for you covers your payout otherwise you will need to drop a lump payment in to get it ready to be closed out by the dealer.

Banks have no issue with sporadic over payment provided minimum payments are all met.

302 XC · 09-10-2010, 08:59 PM

If theres a short fall between what a car yard offers and the payout
This amount usually gets whacked onto the other car if your purchasing another threw said yard

cedric · 09-10-2010, 09:14 PM

Quote:

Originally Posted by 302 XC

If theres a short fall between what a car yard offers and the payout
This amount usually gets whacked onto the other car if your purchasing another threw said yard

That is illeagle apparently but every car yard does it . they are not suppost to set up a loan for more than the car is worth. you will be FAR better off keeping the car you have and paying off as quick as possible

Smoke Pursuit · 09-10-2010, 10:03 PM

Quote:

Originally Posted by cedric

That is illeagle apparently but every car yard does it . they are not suppost to set up a loan for more than the car is worth. you will be FAR better off keeping the car you have and paying off as quick as possible

Jacking cars typically isnt illegal. Most car dealers do it.

What they do is instead of discounting the new car 5 - 10 kay, they give you more trade in by that amount and charge you full book retail for the new car.. This always happens on lease cars that are traded prior to the expiry of the lease, usually because there are penalties involved or the the fact that the interest is capitalised at the start of the loan.

Not illegal, only if they start blowing out the price above retail, but to be honest most banks will go on a dealer tax invoice regardless.

cycle myth · 09-10-2010, 10:08 PM

There's many options but as those have said here the financier will set the rules - talk to them and understand your situation first.

1) Some financiers will let you substitute the security (the car) for a different one if they are not materially worse off (ie if they are worth about the same)

2) Some will not require security if your loan balance is less than $20k (and you have been a good egg)

3) Be careful if you are adding the negative equity of one car (ie if the car is worth less than the loan) to another new purchase - bad on bad will make your regretful situation worse...

4) Financiers do want to see regular payments over a good period of time to give a credit rating, 2 yrs + is normally enough. Maybe you want to raise the size of the repayment to a level that you think you can afford for a good period of time to prove it to them

5) Some may let you access or redraw the extra payments later for a payment holiday or cash

6) be careful when paying a loan down early - there can be penalties that don't make it worth while

Good luck

Ben73 · 10-10-2010, 08:39 PM

The car I am looking at getting is about 4 years old, so it has lost most of its value already and is now worth about $30,000. Since it's 4 years old it should start to depreciate slower.
My current car which is only 8 months old, it is still losing value fast, was 34,000 new. Now worth under $30,000. So surly the "new car" which is actually older, could be used as security replacement in the loan.

I know I will have to contact the bank, but I was getting a general idea before I do anything.

Eu-GenixX · 12-10-2010, 01:01 PM

pretty sure you have to settle your old contract.. and make a new one for the next car..

wrongwaynorris · 12-10-2010, 04:14 PM

It's a " Secured loan " so I would be amazed if any institution would simply transfer it to another vehicle . Most will say pay out the existing loan and reapply for a new one . Hate to burst your bubble but if you payed $34,000 8 months ago there is no way on earth it will be worth anything like $30,000 now . Dont get trade in valuations ( including OA ) and actual values mixed up . The instant you screw a number plate to new car it becomes second hand and the most massive depreciation occurs there and then at thet instant . $ 34,000.00 would have gone to under $ 30,000.00 in the time it took you to drive off the forecourt .

cycle myth · 12-10-2010, 10:32 PM

Matey - if you main concern is ongoing depreciation and you are trying to avoid it with a another purchase... this may not be the way to go.

You won't really know until you get a changer over price of the replacement car and your trade in.

Whether you can substitute the collateral or not or have the pay the loan out and the fees associated - this could be small fry.

As some of the guys here have said when you buy a new car you have already bought the depreciation.

Play with some sums - it may not be worth it.

b0son · 12-10-2010, 11:05 PM

Quote:

Originally Posted by Ben73

Is it possible for me to trade in my car for a vehicle of similar value and just continue paying my loan off like nothing is different.

No. Your loan is secured against a specific car. You can sell a car with finance on it, but you need to find out the payout figure ... the buyer then buys the carwith a cheque made out to your bank, and you get any left over.

Crazy Dazz · 02-11-2010, 04:23 AM

Quote:

Originally Posted by Ben73

The car I am looking at getting is about 4 years old, so it has lost most of its value already and is now worth about $30,000. Since it's 4 years old it should start to depreciate slower.

That’s a myth.
When you buy any car, you “lose” the stamp duty and the dealer’s profit. That money is just gone. After that, all other things being equal, cars depreciate at a fairly consistent rate until they hit bottom.
However the value of any second hand car is really determined by supply and demand, so the apparent rate of depreciation can vary between models. Models that have huge fleets dumping their cars after 1 or 2 years therefore suffer more depreciation in the first couple of years.

When you bought your new car, the money you paid for stamp duty and dealer profit is gone.
If they are offering you a $30k trade-in on a $30k second hand car, you can guarantee that car is actually worth way less than $30k.
If you buy the 2nd hand car, you will get a nasty little bill for the stamp duty, which again is simply money lost.
Unless the 2nd hand car you’re buying is a Merc, it will depreciate just as fast as your existing car.

You have a nice, nearly new car; just enjoy and stop listening to all the nellies telling you you’re losing money.
Make extra payments when you can.

If you really want to SAVE money, then you’ll have to sell your near new car, and opt for something around $10k.

EB# · 02-11-2010, 08:21 AM

I tend to agree that the biggest depreciation hits and other expenses seem to occour
at purchase, so to turn vehicles around in short time frames just multiplies
the losses..... Not to mention that another loan, or re-financing will attract
another round of application and bank fees ?

Essentially you've already taken a fair hit on depreciation.... why line up
for another ? Spread the single hit out over time is my logic.

I'd suggest hanging onto the car you've got, pay it off quick as you can
and make some savings in less interest.

Ben73 · 02-11-2010, 08:51 AM

Thanks for all the replies.
I decided I'll keep the car until the warranty runs out in march 2013.
I am going to make massive extra payments to knock the loan over and save on interest. Hopefully have the 4 year loan over and done with in 2 years instead.
Then after the loan is done I can save up for better things!

OLDFORDNUT · 02-11-2010, 09:03 AM

Quote:

Originally Posted by Ben73

Thanks for all the replies.
I decided I'll keep the car until the warranty runs out in march 2013.
I am going to make massive extra payments to knock the loan over and save on interest. Hopefully have the 4 year loan over and done with in 2 years instead.
Then after the loan is done I can save up for better things!

great idea,will cost you less over the long run.and at the end the car you really want will be heaps cheaper too.