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Discussion Starter #1
I have an '06 Tundra DC Limited TRD.

Thinking of trading it in for an 07 Taco single cab, stripped down 4x4 (crank windows, white, 5spd, 2.7L.

Reason: recent divorce leaves me financially struggling.

It would appear I can save ~250/mo on payment, plus saved gas milage.

Thoughts?
 

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You say financially struggeling. How about a used truck, that would really help you and probably kill that payment completely.
Trading in an '06 for an '07 won't help you much at all. At least not in the long run. Buying a new vehicle makes you lose large amounts of money almost immediately, and that's what you are about to do .... BIG MISTAKE!
 

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Discussion Starter #3
You say financially struggeling. How about a used truck, that would really help you and probably kill that payment completely.
Trading in an '06 for an '07 won't help you much at all.
I have negative equity i have to carry, so a used not an option....

Dealer is saying they can get my payment down 250....then figure savings in gas and insurance....

Just worried about the quality-of-life/truck drop...
 

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It all depends on how bad they are trying to rape you on your trade in. Are they at least giving you the new truck at or below invoice?
 

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I have negative equity i have to carry, so a used not an option....
You are about in the worst position you could be in with this. Is there any way you can catch up to make up for the difference and eventually sell the truck? If you shop for payments only (as it sounds you do), the dealer has you exactly where he wants you.
Again: tacking on the negative equity onto a new truck will make things worse in the long run. I think you have to get throught this and save some money to catch up, then sell and get something you can afford. (a second job?)
But also let this be a lesson for the future: save the money first and then get the vehicle, or at least have enough of a down payment to never be upside down. Never ever finance a vehicle for more then 3 years.

Just worried about the quality-of-life/truck drop...
Your quality of life probably will go up once the truck is gone --- because you also got rid of this monkey on your back (the financial struggle). Used Tacomas a nice trucks, too!

Good luck to you with this ....
 

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Discussion Starter #6
It all depends on how bad they are trying to rape you on your trade in. Are they at least giving you the new truck at or below invoice?
need to see the official quote...so far discussion is limited to "reduce payment"
 

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To get away from the negative equity / payment side...

You cant go wrong with that truck / engine.
I had the 2.7l in my 2001 prerunner extended cab and it had plenty of power to do what I needed at the time.
I loaded the bed to the top of the rails with concrete pavers and the truck chugged right along, no problem.
It hauled my boat fine too.
It is not going to be fast, and you will need to retrain yourself to drive it (coming out of a V8 to a 4 takes a bit of patience), but it is a good engine.

That said, my 01 was getting mid 18 mpg consistently, and I was not pushing it at all normally. Occasional loads / towing only.
so my prerunner extended cab -vs- your proposed 4x4 reg cab with the advances in the engine (vvit) the mileage will likely be pretty close.

I got mine with 3000 miles as a demo, right out from under a salesman lol.
I was in a situation too, coming out of a real POS transmission eating ford, dying to get into something reliable.
 

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. Never ever finance a vehicle for more then 3 years.

Might I inquire as to your reasoning behind this? I mean if you put enough down and you can afford your payments? aren't you only going to be upside down for the first maybe 6 months or so until the interest is paid off
 

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Phi Kai, it will avoid what happened to ncj: being upside down, which is really bad and can quickly ruin you / your family financially. Really quickly, believe me. The 3 years is a good rule of thumb. I'd even go so far to say to never finance a vehicle, as it is a depreciating asset. Unless you are very sure you can get a higher return for your money elsewhere, that is.

aren't you only going to be upside down for the first maybe 6 months or so until the interest is paid off
I don't quite understand this .... The interest isn't paid off until you made the last payment. And being upside down is usually caused by the quick depreciation of a new car/truck, combined with 100% financing and a 5, 6 or even 7 year loan period.
Tacking on the amount you are down on an existing loan on top of a new 100% financed truck will only make the upside down amount much bigger, real quick. The dealer and their finance dept. will love you for it, of course ... :D
This move could make sense if the new truck really costs A LOT less, but one could only tell if we would know many more details here. A used truck still probably would make the most sense to help ncj out of this crunch.
 

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Phi Kai, it will avoid what happened to ncj: being upside down, which is really bad and can quickly ruin you / your family financially. Really quickly, believe me. The 3 years it is a good rule of thumb. I'd even go so far to say to never finance a vehicle, as it is a depreciating asset. Unless you are very sure you can get a higher return for your money elsewhere, that is.


I don't quite understand this .... The interest isn't paid off until you made the last payment. And being upside down is usually caused by the quick depreciation of a new car/truck, combined with 100% financing and a 5, 6 or even 7 year loan period.
Most loans work on the fact that initially all your paying is interest...interest is calculated out for the entire amount based on how many years its financed and then that total price is divided by financing months. While interest > principal loan amount your pretty much ****ed cause you aren't really paying for the car yet...after a certain point in time...generally not too long on a good car loan principal > interest and therefore your really paying for the car moreso than the money...

also, with a toyota they tend to hold value extremely well and don't depreciate at such an exponential rate that you would be upside down so quickly...

Also, I didn't say anything about 100% financing...if you finance a car 100% your just an idiot, you really should have something going into buying a new car. I'm assuming a decent down payment and wondering why you say don't finance for more than 3 years...I just find that to be an extremely short period of time. Average car loans are 4 years or more, in fact on a 3 year loan with a 30k dollar truck... youd be looking at stupid high payments for those 3 years... somewhere in the neigborhood of 800/month.

Once again I ask...why no more than 3 years?
 

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Most loans work on the fact that initially all your paying is interest
Phi Kai, no, you pay interest on the outstanding balance of the loan. There is usually no such thing as front loading of interest. The amount of interest will go down over time, as is the outstanding balance.

interest is calculated out for the entire amount based on how many years its financed and then that total price is divided by financing months.
Those loans do exist, but I'd call that sub-prime lending. Very bad, worse then 0% down IMO. Whoever signs a loan like that made a HUGE mistake!
 

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Phi Kai, no, you pay interest on the outstanding balance of the loan. There is usually no such thing as front loading of interest. The amount of interest will go down over time, as is the outstanding balance.

After looking over some loan tables...i was wrong...miscalculated the % basis of intereste vs. principal...should have paid better attention in finance...o well haha...

anyway...i'm still not sure of why no more than 3 years of financing...it still results in stupid high payments

3 Year 25k Loan

6 year 25k Loan

I mean you spend 3k more over the course of the loan financing for 6 years...but you are also spending 300 less a month to finance the car. I just don't understand why only 3 years...

Those loans do exist, but I'd call that sub-prime lending. Very bad, worse then 0% down IMO. Whoever signs a loan like that made a HUGE mistake!
I don't think that would be all bad...I mean if your just trying to carry a property or something for a few months you could probably get away with it fine...
 

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Those loans do exist, but I'd call that sub-prime lending. Very bad, worse then 0% down IMO. Whoever signs a loan like that made a HUGE mistake!
Student loans and fixed-rate mortgages are front-loaded on interest. This protects the lender from borrowers that pre-pay. They make it sound like they're doing you a favor by not charging you a pre-payment penalty, but really they get their money because you're not going to pay it off in the first year or two, and during that time all you're paying is interest.

Revolving credit (credit cards, lines of credit) and auto-loans are not front-loaded on interest. As you said, you pay the interest percentage on the balance.

Never ever finance a vehicle for more then 3 years.
What if it's a 0% loan? I got 0-for-60 on my Jeep. The initial loan amount is all I'll ever pay. I know that with a shorter loan you'll have higher payments and thus will own more of the vehicle sooner. So, I guess your reasoning here is that with a shorter loan, your payments will out-pace or at least keep up better with the depriciation of the vehicle. Is that it?


also, with a toyota they tend to hold value extremely well and don't depreciate at such an exponential rate that you would be upside down so quickly...
This is true that Toyotas have higher than average resale value, but they're not houses or diamonds. They drop in value dramatically as soon as you sign your name and drive them off the lot. So I think the idea is to do your math ahead of time and make sure that at no point will you ever owe more on your car than it's worth. If you do, you could find yourself in a very bad position. For instance, if you total it and the insurer gives you the KBB value of $17000 but you still owe $26000. You just lost $9000. Insurers sell something called Gap Insurance to protect against this, but a wise buyer would avoid needing to pay for this.

FWIW, I'm upside-down on my cars right now. I know it's not a good position to be in, but I was willing to take the risk right now while my wife & I are still in our 20's. I won't ever be upside-down on another car again.
 

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Never ever finance a vehicle for more then 3 years.
That is rediculous advice. I financed my new-used 2005 Double Cab for 7 years @ 3.9%. I then take the cash I could have paid for the truck (depreciating assett) and invest it other ways. Its very hard not to make 5% on your money currently - net earnings of 1.1% off the bat with a typical safe investment. I've done other things and made 15-20% ROI. Paying cash is stupid when you can work the system to your advantage.

OTOH if you are not financially responsible (getting upside down IS irresponsible) then I can understand your advice about 3 years. But just know that rule does not apply to everyone ;)
 

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Student loans and fixed-rate mortgages are front-loaded on interest. This protects the lender from borrowers that pre-pay. They make it sound like they're doing you a favor by not charging you a pre-payment penalty, but really they get their money because you're not going to pay it off in the first year or two, and during that time all you're paying is interest.
Simply not true. Show me one mortgage like that! That would be one heck of a BAD mortgage, LOL!

What if it's a 0% loan? I got 0-for-60 on my Jeep.
That's a special case. Of course, you'd invest the money and keep the loan for as long as possible. I stated that earlier in my other post also. Be careful though, as often they offer either cash back or 0% financing.

So I think the idea is to do your math ahead of time and make sure that at no point will you ever owe more on your car than it's worth. If you do, you could find yourself in a very bad position.
Exactly! :tu:
 

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I financed my new-used 2005 Double Cab for 7 years @ 3.9%. I then take the cash I could have paid for the truck (depreciating assett) and invest it other ways. Its very hard not to make 5% on your money currently - net earnings of 1.1% off the bat with a typical safe investment. I've done other things and made 15-20% ROI. Paying cash is stupid when you can work the system to your advantage.
Justin, I agree 100%. And I said that in the first place: I said:
Unless you are very sure you can get a higher return for your money elsewhere, that is.
One thing though about your example: You'll have to pay taxes on the 5%, which probably will negate the net earnings of 1.1%, but your point in general is definately correct.
The 3 years is just a rough rule of thumb for those who can't run the exact numbers themselves. A shorter term will help in not being upside down. Nothing else.
 
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