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Re: I bought mine..(MisplacedYankee) - LONG
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Posted by MisplacedYankee [Email] (#1756) [Profile/Gallery] (more from MisplacedYankee) on Tue, 1 Oct 2002 21:39:00 Share Post by Email
In Reply to: Re: I bought mine..(MisplacedYankee), Scott Hanson, Tue, 1 Oct 2002 19:39:18
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Sure. Its a pretty simple analysis really where you compare how much you owe over time versus what you believe the trade-in is worth. It is easy to calculate the remaining you will owe using a spreadsheet or financial calculator and the trade-in value can be had by experience or by looking at trade-in values over time from a trusted source (I always discount Edmunds and KBB by 10% since I have never gotten their values as a trade-in).

Example:

Here is something I recently did with the Chevy Suburban Z71 I just purchased in July with 0% interest over 60 months:


I financed/paid $38053.75 -- this was my out the door price - I put nothing down and owed nothing (negative equity) on the car I traded. My payment is $634.23 a month at 0% over 60 months. This analysis is easy math since there is no interest and every payment goes to the principal of the loan. In this case I see the vehicle paid off as follows:

Owe Over Time
$38,053.75 Day 1
$30,443.00 After 12 Months
$22,832.25 After 24 Months
$15,221.50 After 36 Months
$7,610.75 After 48 Months
$- After 60 Months

I then compare this to a conservative depreciation schedule. I have experience with these trucks since I traded a 2001 Chevy Tahoe for the Suburban - they depreciate about as much as a Saab off the lot.


Estimated Trade-in Value
$43,185 MSRP - Bought for $38,053
$26500 After 12 Months
$22000 After 24 Months
$17000 After 36 Months
$13500 After 48 Months
$10000 After 60 Months

As you can see I have a huge drop in the first year - $12K. We usually drive 15K a year so that is pretty conservative. I also have some knowledge here - I bought my Tahoe for $33K ($38.5K MSRP) and after one year it traded-in at $26K.

So what I do is just compare the two so I know when I am right side up on the deal. Based on this analysis and the great 0% rate it matches at 2 years. In general with a 5% to 6% rate its more like 2.5 to 3 years. This analysis is handy if you like to trade out cars a lot. Compare this against a 2 year lease on the same vehicle. They offer a $2500 incentive so out the door I would have paid $35,500 and probably have a money factor that is the equivalant of 7% interest, but my payment would be about the same or more and with the purchase I have no nasty contractual obligations.

I hope that was helpful. If you email me I can send you a little spreadsheet I use to figure out payments etc on a purchase. I just use the website calcualtors to figure what the lease would be - there are enough of them out there to use...

MisplacedYankee
02 Aero




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