Got a financial question (auto loan related)

"CobraJoe" (cobrajoe) 12/11/2015 at 13:48 • Filed to: None

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So, I’m looking to replace our sensible little wagon for something a bit more fun. (Yes, I found an S60R with a manual).

The problem is that we rolled a bit of extra debt into the purchase of our little wagon (Don’t leave leases early guys, dumb move on our part), and we still owe about $2500 on top of what the car is worth. My wife doesn’t want to roll that excess into the loan for a different car, but short of selling privately for much more than our little car is worth, there’s no chance to completely eliminate that extra debt other than making monthly payments (like we’re currently doing).

So, the question: Does it make any difference to roll that extra debt into the new loan? If we do, we’ll still be making payments on that extra, we’ll still have a loan larger than the car’s worth, but I’d be driving a more entertaining car that’s hard to find. Or should I just keep driving the sensible car until the loan is equal to the value of the car and then hope I can find another R in good condition?

bob and john > CobraJoe 12/11/2015 at 13:52

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good quality Rs are getting hard to find. not to mention they can get pricey if maintenance is left neglected.

I vote you jump on the R

Chariotoflove > CobraJoe 12/11/2015 at 13:54

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My knee jerk reaction is to not take on extra debt if you don’t absolutely need to. You’ve got a working car. I’d stay with it and keep something more fun as a goal for the future to work toward. But, you are the only one who can decide what your comfortable debt level is.

Tripper > CobraJoe 12/11/2015 at 13:54

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Since you’re going to be paying for it either way, the only reason to roll the debt into the new car loan is if the interest rate is lower. If it makes you feel any better, I rolled 8k into a new loan on a used M3 when I was 22 :)

Jcarr > CobraJoe 12/11/2015 at 13:55

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Gonna go Ned Flanders here and say keep driving the old car. I’d trying getting above water on the car loan before taking on or adding to existing debt.

CobraJoe > bob and john 12/11/2015 at 13:58

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That’s my biggest worry about the R in question, it’s a 2004 and has a few aftermarket parts and 143k miles, so it’s possible it was neglected and it’s possible it was nicely repaired every time. That’ll be my biggest reason to nix the deal if the wife agrees to it.

Future next gen S2000 owner > CobraJoe 12/11/2015 at 14:00

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The only difference is you will be paying more on a car than it is worth for quite a while. If you can find a bank that will swing that much negative equity into a loan you could do it if you find the payments reasonable.

If you can swing the new payment I say you go for it. Life is short. Keep your wife happy. Drive something fun.

bob and john > CobraJoe 12/11/2015 at 14:02

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have you taken it to a R special list to get it checked out?

Party-vi > CobraJoe 12/11/2015 at 14:03

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I swear to Cthulhu everyone on this site has a memory as long as a short-ram intake. I have never ever in my years of posting on Oppositelock ever seen a post that remotely read “hey update on my Volvo R - everything is working as it should and I haven’t had any issues at all”.

You’re worried about the cost of rolling some previous debt and some additional debt into a new loan on a Volvo R, a high performance car with a penchant for shitting all over the personal finances of owners? Don’t spend $15,000 to buy a $9,000 Volvo.

CobraJoe > bob and john 12/11/2015 at 14:06

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I have not, and I’m not even sure there is an R specialist around here. I was planning on at least taking an extended test drive and crawling over the entire car looking for anythign suspect, especially the areas suggested to inspect on the SwedeSpeed forum.

TheMuffinMan834 > CobraJoe 12/11/2015 at 14:07

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Can you handle paying off the lease separately, while taking out the loan on the newer car? If you roll the excess into the new loan, you’ll be paying more due to the APR of the new loan being calculated on to the previous one. If you have a very low apr (~3%) it’s not too much of a hit, then I say roll it in if that’s what seems financially the easiest. Don’t know where you’re located but I just used PNC bank for my end of lease (they have special low rates for buyouts and early end leases), got 3.29 from them on 72 months. Got my dealer to take it down to 2.95 and 75 months after coming back to them with the bank loan in person.

tl;dr: 1)your cheapest way is to finish the monthly payments on the lease, while finding a cheap loan for your new car from a bank.

2)That said, if you get a low APR (~3%) the difference is very negligible so you should just roll the debt into the new loan if you can’t handle 2 monthly payments, it's not as bad as you think.

MontegoMan562 is a Capri RS Owner > CobraJoe 12/11/2015 at 14:07

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Do not roll extra cost into a car with that much mileage. Too much, they have a tendency to need repairs like Party -vi said.

I mean you’re going to be paying on it anyhow, if you were going to roll it in I would highly suggest something with a lot more life left in it.

CobraJoe > Tripper 12/11/2015 at 14:08

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Good call on the intrerest rate, I’ll have to look and see what we’re set up with now for a rate.

It was my wife’s car that she was leasing, a base 2009 Corolla. It was horrid, so I convinced her to get rid of it for something more comfortable. We’ve been paying for it ever since.

bob and john > CobraJoe 12/11/2015 at 14:09

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definitely take it to at LEAST a volvo mechanic.

Tripper > CobraJoe 12/11/2015 at 14:11

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Haha I don’t blame you on the corolla though, I was stuck driving a 2013 corolla from CT to Philadelphia. Worst drive ever.

jjhats > Party-vi 12/11/2015 at 14:16

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if it weren’t for this site I would’ve bought one by now. theres 3 MT v70R on my local cl right now all under 8k

CobraJoe > Future next gen S2000 owner 12/11/2015 at 14:17

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We already are paying more on a car than what it’s really worth. I do have some hope that a well kept R will hold value better than a base V50. I don’t think finding a bank will be a problem, the dealership is more than willing to make it work and we have a great credit score.

LeadfootYT > Party-vi 12/11/2015 at 14:18

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Best metaphor ever, but absolutely correct. Suspension, Haldex system, typical engine leaks, wheel bearings. I’m sure they were fun cars between 0 and 40,000 miles, but no longer.

Party-vi > LeadfootYT 12/11/2015 at 14:21

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There are a few with under 60,000 miles on them for sub $10,000 asking prices. It’s amazing how cheap these are to purchase, just like the S80.

CobraJoe > Party-vi 12/11/2015 at 14:21

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I’m not looking for something 100% reliable, I’m not afraid of doing my own work, though I do not like the idea of expensive parts.

As for the costs, the plan is more like spending $8000 to buy a $6500 high performance Volvo (Going to talk them down a bit, I think they’re ready to get it off their lot, and the shifter does need an adjustment).

The cost of maintenance and repairs is certainly a factor, but it’s been far too long since I’ve owned a car that felt special, and there aren’t many in my price range with a manual and room for car seats in the back. I am open to hearing suggestions though.

Future next gen S2000 owner > CobraJoe 12/11/2015 at 14:25

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Trading in will only add to the negative equity situation. So you will have a larger portion of the new loan as negative equity from the old car.

Just make sure the car is worth it. You can always find one at a later time. It just may be a bit more difficult.

CobraJoe > TheMuffinMan834 12/11/2015 at 14:27

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The lease is long gone, rolled into a purchase a while ago, there’s just a bit of the debt still remaining on the V50 I’m currently driving.

Looks like APR is going to be the biggest deciding factor on whether it’s a stupid idea or not. The actual condition of the car is the bigger deciding factor whether I buy it or not (well, the wife’s opinion too).

Aaron M - MasoFiST > CobraJoe 12/11/2015 at 14:28

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I did a stint in auto wholesaling in my consulting years, which included a crash course on auto finance. Here’s the basics:

Depending on your credit score, you will get approved for a loan that’s a certain percentage of the value of your new car. If you have great credit, this can be 120% of the car, even a used one. If your credit is merely OK, it’ll top out at 100%, and if you’re rocking a <500 FICO, you may be capped at 75 or 80%. If you ever see a buy-here-pay-here lot advertising zero down, they cover it by charging 120-150% more than the car’s worth, and repossessing aggressively. Anyways.

When you trade in a car that still has money owed on it, first thing the bank will figure out is if they actually want to give you a loan for the full amount. If you’re looking at buying a V70R for, say, 10 grand and you have an extra $2500 to deal with, there’s a pretty good chance a bank will reject you unless you a) come up with the money in cash, b) accept a higher rate, or c) both. Banks also use the car’s history and black book values to figure out how it’s depreciating, so there’s a chance they simply won’t write a loan for a car that old unless your credit report is clean enough to eat off of.

In short, you’re going to have a bad time. First, ten years is the cut off for many places to write you a loan at all, and the older the car the better FICO they’ll demand. Second, you’ll need to get approved for a loan value higher than the value of the car, which requires at least a 750 FICO. And third, the bank estimates on the value of cars is based on wholesale price, which could hurt even more for getting approved for the amount of money you’d need.

Party-vi > CobraJoe 12/11/2015 at 14:32

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I think you would do just fine with an E39 540i, and for that budget you should get a pretty good one. Plus, I don’t think the E39 had any explody bits around the engine, unlike the forced-induction Volvo you pine after. You could also look for an E46 sedan 330i with a manual, but it’s not exactly a quick car. Just be careful and make sure you’ve got some money tucked away for emergency Volvo repairs.

Arrivederci > CobraJoe 12/11/2015 at 14:34

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As others have said, the only additional cost would be if you roll that debt into a new loan that has a higher interest rate. Otherwise, not really any different than you’re at now. That said, most banks won’t lend more than 110% of book value. So if that $2500 of negative equity puts you beyond 110% of what the new car is worth, you’re chances of finding financing are pretty slim.

CobraJoe > Aaron M - MasoFiST 12/11/2015 at 14:37

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That is some great insider knowledge. I know our credit score is on the great to awesome side (or it was last time I looked and shouldn’t have changed), but you do have me worried what they’d charge extra for a car like the R. I’m sure the whole sale price is really low, since NADA and KBB put them down much lower than they’re often listed at, and considering it’s an enthusiast’s car, they don’t have many sales to point to the contrary.

they-will-know-my-velocity > CobraJoe 12/11/2015 at 14:37

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In the grand scheme of things, $2500 isn’t much. If you can get a better interest rate for the life of the loan that will save you money vs waiting...I’d do it.

But it would have to be a pretty good interest rate.

CobraJoe > MontegoMan562 is a Capri RS Owner 12/11/2015 at 14:46

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That’s starting to sound like a wise answer. But kind of a sad answer.

Seems like it takes a gearhead (or a whole gang of them) to talk some sense into my purchasing habits.

Aaron M - MasoFiST > CobraJoe 12/11/2015 at 14:49

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The car is going to affect much more of how much they’ll lend you than the actual rate in most cases. The only issue is that if you’re buying a 2004 V70R for less than 10k (or any car for less than 10k), you’re rolling a lot of extra debt into it relative to the price. It would actually be easier to buy a newer car for 20k and roll the 2500 into it, because the collateral is worth more.

If you have good credit, it just boils down to the fact that not only are you going in with no down payment, you’re basically asking for a negative down payment. When I bought my BMW (i.e. two weeks ago), my credit was good enough that I got approved around 2.5% with a 120% maximum (which would have been just enough to cover OTD with 0 down), but if I could have gotten my loan size down to around 70% of the value the rate would have gone down to 1.9%. If your credit score is good, you’d probably be expecting a move in the opposite direction to the tune of 0.5 to 1 percent. If it’s the car you want it may not make a huge difference, that would add up to maybe $1000 over five years. Still, that is basically a $1000 surcharge for dealing with your existing debt.

CobraJoe > Future next gen S2000 owner 12/11/2015 at 14:51

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True, true. I don’t have to jump on this one, even if they’re hard to come by. Probably better to wait it out and keep paying down the loan.

Funktheduck > CobraJoe 12/11/2015 at 15:02

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Don't do it. High mileage and possibly unreliable. You're just asking for trouble

CobraJoe > Party-vi 12/11/2015 at 15:09

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Any BMW with more than a 2.8L engine and a manual is a difficult find around here, . I did drive a 328xi, and I was unimpressed by the engine, though I did drive it right after that S60R...

It’s a shame the S60R is known to be such a problem child. Our V50 2.4i has been rock solid, only problem was when a pin fell out of the door mechanism. In fact, I love it so much that I did search for a V50 turbo manual, but those are even more rare than the V70R manual apparently.

CobraJoe > Aaron M - MasoFiST 12/11/2015 at 15:14

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That is quite a difference just caused by the extra bit of money. I’ll have to run some numbers with what I’m working with to see for sure, but I think it’s been pretty well proven to me that it’ll cost more than I’m expecting.

Aaron M - MasoFiST > CobraJoe 12/11/2015 at 15:22

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It’ll make a huge difference to hammer on the loan you have now until you have positive equity in the current car. Remember that though a prime rate car loan is around 2%, a prime rate unsecured loan is around 6%, so the bank will be trying to charge you that 6% for every dollar you borrow that isn’t covered by collateral. That’s an oversimplification, but it does give you an idea of what you’re dealing with.

MontegoMan562 is a Capri RS Owner > CobraJoe 12/11/2015 at 15:24

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I mean, it’s all about the vehicle.

It’s not that you can’t take a hit and get a fun car. I wouldn’t say that.

What I would say is you need one that’s ungodly reliable lol.

And a lot of times that sporty/fun cars aren’t ungodly reliable.

Me, I want to ditch my sensible economical ungodly reliable 07 Mercury Milan (100k miles) to buy a similar mileage or even a tiny bit higher Yukon. The trick being that the Yukon is very, very reliable. So even at 125k miles the Yukon is solid as a rock.

Oh and I’m sick of being in a little car. I’ve put 55,000 miles on this thing.

I see you were considering a Fusion Sport a while ago btw, I’d take one. My car plus 40-50 hp? Hell yeah. Also, that same 3.5L motor is STANDARD in an MKZ/Zephyr.

CobraJoe > MontegoMan562 is a Capri RS Owner 12/11/2015 at 15:43

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You do make a good point. If you’re going underwater to buy a fun car, you don’t want to spend even more money on repairs later.

I’m rather the opposite when it comes to car size though, I like my tiny wagon, the only thing I’m tired of is how non-special it feels. Honestly, the only thing I can complain about is the uncomfortable seats, but there’s nothing I can brag about it either. There’s not a whole lot I can modify either, most companies focus on the T5 turbo version for performance parts.

Oh well, back to searching and dreaming about cars. Good luck on finding a Yukon to fit your budget and may it be happy in your garage when you do.

MontegoMan562 is a Capri RS Owner > CobraJoe 12/11/2015 at 15:54

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Like it would fit in my garage LOL

Well maybe like I mentioned (that you previously mentioned) you check out the Fusion Sport. Honestly, with just the 3.0 in the Milan it’s pretty fun. I can spin the tires for about 100-200 feet when I push the TSC OFF button, and I’ve taken wider exit ramps at 85 mph before. It’s not bad. I imagine the 3.5 would be even more fun.

And special because how many “Sport” trim’s do you see?

CobraJoe > MontegoMan562 is a Capri RS Owner 12/11/2015 at 16:06

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I did take one on a very breif test drive (it was almost out of gas). The engine was great, but the AWD didn’t seem to help prevent the wheelspin and the rest of the car felt rather rubbery instead of sporty. Mostly though, it’s kicked to the bottom of the list simply because it doesn’t have a manual, and I’m kind of stuck on wanting one. (And funny enough, the S60 is the chassis that the Fusion was based on, and the Edge that’s also in our garage too.)

It’s not completely off the list though, I liked it better than the 328xi I test drove, and for a better price too.

samssun > CobraJoe 12/11/2015 at 16:16

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Being underwater on a 2004 with 143k is not a great position to be in. Regardless of how much you want it, nobody else really cares about an 11 year old Volvo, so it’s not like you have some classic you can easily liquidate if you need cash.

I’d be looking to make accelerated payments on the current car, then if you want something a decade old buy it in cash.

MontegoMan562 is a Capri RS Owner > CobraJoe 12/11/2015 at 16:32

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While also not a stick, maybe an MKZ would have a nicer feel to the interior. Same 3.5L

Dunnik > CobraJoe 12/11/2015 at 16:33

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For a moment I was like, “WTF kind of shifter is that?” And then I saw the tell-tale 12 Volt plug and the air direction panel. “Oh,” I said, “Volvo. Of course.”

They always feel they have to do things differently.

CobraJoe > Dunnik 12/11/2015 at 17:05

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I kind of like that they are different. You can’t have a special car if it’s exactly like everything else.

CobraJoe > samssun 12/11/2015 at 17:06

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That’s the conclusion I’m coming to, I just can’t trust the reputation of the Rs, and the age and mileage aren’t helping.

Making accelerated payments might be a good idea, we thought a while back about making a lump payment with some extra cash, but that went towards a higher interest student loan instead.

LeadfootYT > Party-vi 12/14/2015 at 11:27

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Just saw this post. Please Google “E39 timing chain tensioners” and you’ll find the the M62 V8 in the 540i was constructed almost entirely of “explody bits”—not to mention the plethora of other E39 problems, with which I am personally familiar (having owned two). I’d feel more confidant in an S60R than a 540i as far as dependability is concerned

Party-vi > LeadfootYT 12/14/2015 at 11:46

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Doesn’t say much that you’d trust one unreliable car over another unreliable car. Are E39s that bad?

LeadfootYT > Party-vi 12/14/2015 at 14:51

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Yes. I bought my first 530i (Topaz Blue, black interior, sport pack, premium pack, M Pars—gorgeous car) in good shape for $4500. One year and $5500 in repairs later, and I finally sold it—and it needed about $2000 in rear suspension, power steering, and miscellaneous belt work when it was sold.

The 540i on the other hand has all the same issues, combined with the plastic timing chain tensioners that shatter and eat the timing components. I’ve known two people who had these cars—in one, the tensioners/guides failed (the repairs is new heads, so $4000-5000 with labor) and caused the owner to scrap the entire car—a BMW Individual E39 540i/6. The second friend was $15,000 into a $5,000 car when he sold it at the end of his first year of ownership—and we just found out that the tensioners just went AGAIN with the current owner (so they lasted a whole additional year!).

That’s in addition to massive oil consumption (“normal”), VANOS complications, power steering leaks, and everything else.

They’re very pleasant cars when they work (I bought another while I owned that car, as a winter beater of sorts, but that ended up costing me about $2k in the six months I owned it). But I’m over them as daily drivers.

Party-vi > LeadfootYT 12/14/2015 at 14:55

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Well there goes my pipe dream 530i sport package. Were those items neglected maintenance issues? That seems to be the source of my ire directed toward my E46 - past due maintenance.

LeadfootYT > Party-vi 12/14/2015 at 19:27

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The majority was, unfortunately. I bought it at 153k, assuming certain maintenance items had been done (which was not the case). Mainly, valve cover gasket, oil filter housing gasket, and water pump/thermostat, although I suspect wherever it is it will need the CCV system done this year. I sold it at 168k, and it had suffered a combination of new things failing (fan clutches, auxiliary fans, power steering pump) and old maintenance issues piling up (power steering leak causing the alternator to fail, the aforementioned water pump/thermostat, etc.). They do eat through batteries and suspension components at all four corners though (and E39s are particularly rough on rear suspension compared to E46s).

That said, I amend my previous (and admittedly biased) comments to say that if you can find a 530i at 110k with *preventative* maintenance done, it would make a pretty fun daily.