Trading in car with upside down balance

[deweyzeph]

Upside down is when you have a negative balance on your car, that is you owe the bank more than what your car is worth because of interest

That's pretty much the situation with every financed car though isn't it? The moment you drive it off the showroom floor you already owe the bank more than the car is worth.

 

[ToxicBunny]

That's pretty much the situation with every financed car though isn't it? The moment you drive it off the showroom floor you already owe the bank more than the car is worth.

Pretty much..

Rule of thumb is break even is between 2 years and 3 years, depending on the vehicle and its depreciation rate.

 

[Maverick Jester]

That being said, that much free cash doesn't seem like enough to commit to property...

Which is probably why the OP wants to sell the car to begin with

 

[Rouxenator]

That's pretty much the situation with every financed car though isn't it? The moment you drive it off the showroom floor you already owe the bank more than the car is worth.

No, if you paid a good enough deposit it will not be the case. If you make a 30% deposit you will be on the safe side.

 

[TehStranger]

Which is probably why the OP wants to sell the car to begin with

True, but he just said reduce his monthly instalments, not get rid of them completely. Even without car repayments at all that puts him on R5,800. That's going to make it hard to qualify for any sort of meaningful bond from the bank unless he has a massive deposit, in which case he can just use some of that as a lump sum on the car. And then there are the costs associated with a house beyond the bond (water and lights, rates, life insurance etc. etc.)

@ OP - Note I'm not trying to knock your idea of buying a house, I just want you to know that your house budget is on the seriously low side, so if the only reason you want to change cars is to work with a R5,800 (or less) budget you'd probably be better off saving elsewhere.

 

[Maverick Jester]

True, but he just said reduce his monthly instalments, not get rid of them completely. Even without car repayments at all that puts him on R5,800. That's going to make it hard to qualify for any sort of meaningful bond from the bank unless he has a massive deposit, in which case he can just use some of that as a lump sum on the car. And then there are the costs associated with a house beyond the bond (water and lights, rates, life insurance etc. etc.)

Depends on the value of the property. Also you're presupposing the OP doesn't pay rent elsewhere which would naturally fall away once a bond has been taken on, meaning that the OP might have a bit more to work with than we know of.

 

[ToxicBunny]

Depends on the value of the property. Also you're presupposing the OP doesn't pay rent elsewhere which would naturally fall away once a bond has been taken on, meaning that the OP might have a bit more to work with than we know of.

Well I would assume the car would be a significant chunk of his disposable income... maybe 20% or so....

I would be surprised if he qualified for a R5800 bond repayment, because it would mean his other expenses are quite a bit out of proportion from what I can gather.

 

[shuzz]

I am currently living with parents. Lower payments would allow me to save R5000 and afford a house with R2500 instalments in Soweto. Township life is affordable, not aiming at a high value house.

Well I would assume the car would be a significant chunk of his disposable income... maybe 20% or so....

I would be surprised if he qualified for a R5800 bond repayment, because it would mean his other expenses are quite a bit out of proportion from what I can gather.

Depends on the value of the property. Also you're presupposing the OP doesn't pay rent elsewhere which would naturally fall away once a bond has been taken on, meaning that the OP might have a bit more to work with than we know of.

True, but he just said reduce his monthly instalments, not get rid of them completely. Even without car repayments at all that puts him on R5,800. That's going to make it hard to qualify for any sort of meaningful bond from the bank unless he has a massive deposit, in which case he can just use some of that as a lump sum on the car. And then there are the costs associated with a house beyond the bond (water and lights, rates, life insurance etc. etc.)

@ OP - Note I'm not trying to knock your idea of buying a house, I just want you to know that your house budget is on the seriously low side, so if the only reason you want to change cars is to work with a R5,800 (or less) budget you'd probably be better off saving elsewhere.

 

[Maverick Jester]

Well I would assume the car would be a significant chunk of his disposable income... maybe 20% or so....

I would be surprised if he qualified for a R5800 bond repayment, because it would mean his other expenses are quite a bit out of proportion from what I can gather.

R5800 would work out to a property value of around R630k. And again, this is assuming that the OP is not already paying a similar amount in rent anyway. We don't really know, but the OP might want to prioritise a higher-valued property over a new car.

 

[Maverick Jester]

I am currently living with parents. Lower payments would allow me to save R5000 and afford a house with R2500 instalments in Soweto. Township life is affordable, not aiming at a high value house.

OK, either way, you seem to have a plan in place.

 

[TehStranger]

Depends on the value of the property. Also you're presupposing the OP doesn't pay rent elsewhere which would naturally fall away once a bond has been taken on, meaning that the OP might have a bit more to work with than we know of.

True, I'm only going on what OP has mentioned, if that's the case he can elaborate. I'm just expressing a view that if he's aiming to reduce the car repayments in order to try buy property with R5,800, he might just be wasting him time. I wouldn't want him to go through the whole process of getting a cheaper car, just to realise that his free capital isn't enough to pursue his property dream.

 

[Rouxenator]

What deposit did you pay on the car when you bought it last year?

 

[TehStranger]

R5800 would work out to a property value of around R630k. And again, this is assuming that the OP is not already paying a similar amount in rent anyway. We don't really know, but the OP might want to prioritise a higher-valued property over a new car.

R5,800 total budget will never get a R630K house. Take away your rates, your water and electricity, life insurance etc. (like I mentioned before) and now he's working with a fair bit less than R5,800 for the bond. The argument is moot though since OP has made his plan clear.

I am currently living with parents. Lower payments would allow me to save R5000 and afford a house with R2500 instalments in Soweto. Township life is affordable, not aiming at a high value house.

Ah ok, that really is very cost effective, in that case good luck to you! Also see my advice above to settle the car.