You are absolutely not ‘cutting your losses’ by rolling negative into a lease. Totally wrong way to think about it. You are re-financing that negative at the interest rate of the new lease. The only way to ‘cut your loss’ is to pay off the negative up front in cash.
So if your payoff is currently $11k, how in the world are you $8k upside down? Did you mean $800?
Yeah, someone tried to rob you. Your car (2013) is worth more than 3k (re:8,000 neg equity)
Edmunds TMV for a base no options rental car 2013 Altima 2.5S with 100k miles:
TRADE-IN
rough average clean outstanding
$2,843 $3,670 $4,873 $5,341
PRIVATE PARTY
rough average clean outstanding
$4,017 $5,050 $6,550 $7,121
But I’m assuming yours isn’t rental car spec based on paying $16k for it with 65k miles…
And don’t forget the extra taxes
The interest rate on a lease depending on the car is very minimal.
For example an ILX has a money factor of .00052 which translates to 1.25% roughly.
It’s going to be tough to stomach the fact that he’s paying $200 more per month when they typically go for around $250-300 a month however he’ll be driving a brand new 2018 with a warranty that he doesn’t have to worry about breaking down on the side of the road.
After the 3 years his negative will be done with and he’lll be able to make a more educated decision now that he found lease hacker.
Your trade values are also not taking into account the fact that the car has a hit on the car fax which lowers the value
It’s cheaper to keep her as they say…
Let’s assume that car is 500/mo (for an archaic civic with an Acura badge). Over 3 years, he’ll pay 18k.
Doesn’t sound like sound advice to me when he could pay off his 11k Altima, maybe dump 2k into repairs and still sell it for 1500 when he’s done.
The point we are trying to make is that his car runs and shouldn’t be giving him any issues where he can’t keep driving it. It’s a poor financial decision to ditch the car just because he doesn’t like it. He’s in a bad place and needs to pay his dues before getting something he wants.
I’m also assuming OP is a male. I could be wrong.
A huge assumption is that Acura will accept a lease with a .00052 MF with 8k in negative equity in the Altima. Then he’d be paying the interest and taxes on the negative equity.
Makes no financial sense to me.
Exactly my point. I’m assuming they’ll eat the negative equity, which probably wouldn’t happen anyways. Why pay 18k for an outdated Civic over 3 years just to get out of a car that’s running?
I was just using it as an example.
If OP had Tier 1 Credit and the max advance allowed it then yeah they essentially could approve it at the .00052.
It wouldn’t be any different then a dealership making an 8 grand profit deal on somebody.
But that’s also why I recommended more of a basic car like an ILX that has 5k in rebates to help eat up the negative.
There’s no easy way out of 8k. OP owes it, it is what it is. If it was 1k to 3k in negative equity, then maybe there may be some cars they could lease that hold their value well enough and have enough lease support to justify the change, but not this much…
I have been on the same road. What is driving the valuation so low, it is over 5 years old with 100k and accident which is a perfect storm. You will rarely see any car for sale at dealership or large chain with that kind of mileage/age because no one wants to buy those. Those valuation drop is remnant of old thinking that 100k and/or 5-6 year old car is nearing end of life which is not true at all. The good news for the OP is it will not drop further because it is already low. I would guess your car book value to be around $5k.
I used to buy cars like that and drive it for a year. But i buy cars that is accident free. But guess what, after driving it for a year, i trade it or sell it for $4k which is not bad considering it only cost me $1k of depreciation.
To me any car with over 100k miles that has unknown service history, an accident report etc is a huge gamble.
Granted yes its running now but its very possible that tomorrow the engine could blow up and then your logic goes out the window.
Even if it’s not an engine and lets say he has a $1,500 repair, then that’s $1,500 he has to come up with out of pocket to repair a car thats going to continue to depreciate and lose value anyway.
Everybody is basing their opinion on hypotheticals but it’s pretty common knowledge that a car with over 100k miles on the odometer will start requiring more and more maintenance.
Is there even any new car with enough lease cash on offer and a high enough RV that it makes sense to roll 230/mo into a lease? It would have to be something that OP personally loves otherwise they’ll find themselves in the same boat of wanting something different.
Everyone would be in that boat with repairs… Cars are depreciating assets. The car runs now, the 2.5s Altima doesn’t have signficant power train and engine issues so I think it’s worth more (over time) to simply make higher principal payments for another year.
How bad can it get in 12k more miles?
It’s not a German car with unknown service history… THATS where I’d draw the line.
he could literally dump 7k into that thing (highly unlikely) in repairs, and still come out ahead.
Lol yeah because $7,000 in out of pocket repairs makes tons of sense on a $3,000 car.
And paying 18k to lease a last gen Civic for 3 years makes just as much sense. There is minimal chance he’s putting 7k into that thing to keep it running.
The only real way it doesn’t make sense is if the cost of repair is higher than the negative equity.
I had this same problem with a 142k mile Audi A5. The maintenance and repairs were going to costs me more than what it cost to get out of it with negative equity. So I got out of it.