HisHersMoney

Everyone knows that are new car loses value the day you drive it off the lot. A used car kind of does the same thing as the retail price is higher than the trade in price. If you tried to use your used car as a trade in the day after you bought it you would not get the same value in most circumstances.

I bought my car in Oct 2005, it’s a 2004 Saab and I got a really good deal on it. New the car is right at about $30,000 and I bought mine a year old for about $18,000. Fast forward a few years and I now owe about $6500 on it. I financed it for about three and a half years and then refinanced it about a year later at a lower interest rate. My car should be paid of completely in about a year if I were to continue making the regular payment on it.

Right now my car trade in value is around $8000 so for once I actually have some equity in the thing. Out of curiosity I check what the value was for the same exact car was that was just a year older than mine was with what I projected my milage would be in another year. The trade in then becomes $6500 which is what I could expect my car to be worth in a year from now.

So, today I have about $1500 in equity in my car and next year I will have about $6500 in equity in my car. For the next year every penny I put into my car I could expect to get back from it. We did but the extended warranty directly from GM on the car so any repairs it needs will be covered in full right at the dealership. So, my only real cost for the next 12 months is gas and insurance. Insurance is about $500/year and I use about $75/month in gas, or $900 a year.

So many people are considering buying cars that use less gas these days due to high gas prices. My car has a turbo in it so it requires the premium fuel and gets about 20 miles to the gallon which isn’t a whole lot better than some of the SUVs these days. If I bought a new gas sipping car to replace this one I would have to pay on it for the next few years before I starting breaking even and then probably another year before I starting actually getting value back from my car.

We do not plan on getting rid of the Saab any time soon. It’s covered under the bumper to bumper extended warranty for another two and a half years. By keeping the car that entire time we will have saved ourselves over $8000 in payments and our only extra expenses on it will be regular maintenance.

So question to the readers: When are you no longer upside down on your car?