Tips on Buying Cars: Upside down car loan, chrysler pt cruiser, warranty program

Question
Hi. I have a 2001 Chrysler PT Cruiser that I owe $8700 on and I’ve been getting estimates of trade in value in the $3000-$4000 range. However, the car has a bad transmission; and I’m very concerned about more problems occuring. I have a 715 credit score, and pay 7.25 % on a 60 month loan for a payment of $200 a month. I usually pay $250. I need a new car because when this one breaks I can’t afford $2000 - $4000 in repairs on top of this loan. And it WILL break. I realize that rolling over negative equity is bad, and it’s hard to find a decent used car for $5000 under NADA retail value (my credit union uses NADA). I could afford $300 a month for a car as long as it has a warranty and I know I wouldn’t have to pay for repairs. My credit union has an excellent warranty program that is very comprehensive, but my car isn’t eligible for the service. I’m going to go to college next August and I don’t want some huge payment but I need a new car! If the car breaks, I’ll have to take out a personal loan at 9% interest to cover it. I’ll end up spending a ton on a car I hate! I thought that if, for instance, I were looking at a car that was $11000 but retailed for $15000, I would add the warranty ($1500) making the price $12500. There’s a $2500 difference and if the dealer gave me a trade value of $4000, that would leave me $4700, making the cost $17200. Could I just take out a personal loan for the difference of $2200 so the car would be purchased at full retail value and I would be making two payments? Or is it smarter just to leave it all together? Also, my credit union can only fianance 15% more than the book value of the car - meaning I could fianace $17225. Should I just max it out and make larger payments so I’m not terrificly upside down? It’s a never ending cycle! I want to lease, but I’m unsure of what negative equity will do to a payment. I want ANYTHING that I could get for $300 or under a month with my $4000-$5000 in negative equity for preferably 36 months with 0 down. I know putting money down on a lease is stupid.  I'm desperate; I'll drive a freaking Kia! I think leasing is my best option for getting out of negative equity. I know dealers can play with residual values and money factors to get a preferred payment. I have several volume dealers around me, and I think they'd be my best bet. Sorry I wrote a novel! Thanks!

Answer
Eric...
my best advice - seeing as you are young.. is to trade in or sell the PT - buy a used car (warranty or not) - because even the crappiest used car will not end up costing you 10000 in repair costs.. if you find the right car... get rid of the PT - buy a 5-6000 dollar honda civic, accord, toyota camry, corolla - have your credit union consolidate the loans to a single new loan (having two is not fun... especially in college) - and pay it off EARLY - you should be able to find one that the warranty will cover, but if not - don't sweat it - if you buy a good shape honda/toyota - do proper maintenance (oil change..) - it shouldn't break (atleast not often) - the last thing you want is to be nearly 20000 in debt and in college.. trust me. This way you end up with a ~10000 dollar loan... maybe 200 a month payment..depending on duration and APR - and you can have it paid off before you graduate college (then you will have no debt, and can buy a nice new car) - this way if for some reason money gets tight in school - you wont have a huge debt or payment to worry about.. with the bad tranny you will probably need to trade in - but it never hurts to try to sell... I know what it's like to be in college with a car payment.. and I wish mine was smaller.. take it from someone who has been there - buy a cheap relaible used car... pay it off ASAP - my sister's civic has 170,000 miles - and all she does is change the oil (most of the time...) - that is my best advice... plus it will still be more reliable than a kia... lol