Tips on Buying Cars: should i or should not, honda accord lx, financial investments

Question
trade in my 2005 Honda accord lx for a 2007 accord ex v6.i have had the car for about 2years and the buy out amount is 13.789,my credit is not good but i want a new car with feature i don't have like a navigation system ,there 54.000 mile on the car i do not believe it, because i drive the car 6days a week and the distance i travel to my job is about  45 miles roundtrip.so please tell me what should i do!!!!!!!!!!!!!!

Answer
Hi Angel007,

Thanks for you question. Let’s see what we can come up with on this one.

First of all I have to start by telling you that I can’t make the final decision as to if you should keep what you have or buy something new. It depends on so many different factors, as well as what you actually want. For example, if you’re only interested in the best financial solution, it would probably be better to keep what you have: cars are usually very bad financial investments, especially the way some dealers charge you. But, if you want new features, like the GPS, or just want a new vehicle and not worry about the financial side, then it’s a different story.  Financially, let me give you some kind of idea, ballpark of course since I don’t have the exact numbers on what your car is worth, or what the dealer will charge you for the new one.

Looking at www.kbb.com, a 2005 Honda Accord LX, 4 cylinder, 2.5L, automatic, with typical standard options in good condition, with 54,000 miles shows a trade in value of $10,820. Subtracting this from the $13,789 you currently owe leaves just under $3,000 that you will still owe the bank if you trade it. Unless you can pay it off in cash the dealer will add it to your new vehicle loan, which they are more than happy to do—anything for a sale.

Ok, www.kbb.com shows, for a standard configuration 2007 Accord EX V6.1 with a navigation system, the average selling price (in the Dallas area since I don’t know where you live) is $28,289 (MSRP $30,095.) Adding your $3,000 and guessing at tax, title, and license costs, you’re looking at financing roughly $33,300 giving you a payment of $645 - $650/month, for 60 months. That’s a long time to pay on a car loan, and since most people don’t keep a vehicle for five years, you end up owing more that it’s worth and adding more money into your next car loan.

Ok, now you make the decision. I don’t know what you’re currently paying on your 2005, but subtract that from this $650/month payment and this gives you the reality of the situation. My experience is that most people buy based on emotion; they decide they want something and find a way to rationalize the payment. I can’t tell you how many times I’ve heard buyers say that the payment is way more than they wanted to spend, but they would be getting a raise every year and make it easy to pay for. Sometimes they do, sometimes they end up being in so much debt that it buries them.

I’ve been in your situation wanting a new car so I know exactly what you’re going through. But as I told you in the beginning, I can’t make the decision for you. What I do strongly recommend is that you look at the cost of everything before you make your decision, and decide if this is financially worth it today, 6 months, a year, etc. from now. And if it’s just a GPS you want, you can buy one from a several GPS manufacturers that actually have more features, and that you can take from car to car starting around $250 and going up. This is what I have in my car, and it’s a lot less expensive option.

I hope this does help you at least in some small way to make the final decision. Regardless of which way you go, I like your choice of vehicles.

Regards,


Ron