Well after going to a Local Honda dealer, seems as though i have too much negative equity to keep my payments within a price range i like or could afford. And my Trade-in is the negative equity.

Now the option is Leasing. The wife has been thinking of doing this, but we're both scared to hop into it. Now we figured if we do a 3yr lease, that would mostly consist of negative equity payments and then bounce after the 3 to get rid of the bad equity Or finance on the Fit once the 3 year has hit. Has anyone ever done this?

 

What did Chad say?

 

Miguel,
I'm a Honda salesman...so keep that in mind. I've seen this many times. If the lease will fit your budget and your driving habits, I'd go for it. Hondas lease amazingly well. Most Honda salespeople and managers who own Hondas lease them. I purchased mine because I drive 90 miles round trip daily.

My own sales manager leased a CR-V a few years ago, purchased it at the end of the lease, and then gave it to his son.

If you go in with eyes wide open, you will do fine. Do you understand leasing pros/cons well enough to feel confident?

 

He doesnt have any Fit Sports, and the list is long. Also he said he not expecting much more 08's to come in in the near future, becasue the 09's are so close to release, and that list is pretty large as well.

 

Not confident enough. Please more details please.

 

Do you understand, that if you are already upside down, and then trade for any new car, you are digging yourself a deeper hole?

 

Carrying negative equity into an entry level car (which the Fit is, like it or not) is never a good idea if you can avoid it at all. What are you currently driving that you are that upside down in? Best bet, if the current car isn't a lemon is drive it until you aren't so bad off.

 

Unless you can write off the payments through a business leasing is a terriable way to get a car. It is like throwing money away. Plus they will probably get you in the end anyway with mileage, wear & tear and other shifty contract clauses if you want to trade instead of buying out. If you buy out you are literally throwing at least a thousand dollars away.

You are looking to get yourself into financial trouble if you are not careful. I would reccomend you at least get nutral equity in your current vehicle before going for a Fit.

First off, basically the dealer is going to rip you off on the trade in (hey I know some of you guys are dealers, but it is true). Try to sell your existing car privately first. If you can't get what you owe on it the bottom line is you need to start saving up money so you can just pay out what you owe after you sell it.

I know it sucks and you might have your heart set on a new Fit. But it just isn't worth it to be more in debt than you need to be. If you go through with a lease you will be further reducing your income more than it already is, which means you can't save as much, which means your throwing money away on interest. The long term affect of this decision will probably affect you dramatically and be in the 10's of thousands over just a couple of years (between the depreciation, the taxes, the interest paid, the extra amount the leasing will cost over financing and reduced useable income).

Take it from somebody who has been there!

 

That is darn good advice. The only thing that should allow you to jump in on the lease with negative equity is if you have guaranteed extra funds in the future to cover the losses that you will incur. For most of us, the future is always uncertain, it may be wise to go with your current means as a yardstick for what is most likely to happen. Fits will be around for awhile, even if in used form. A combination of patience and good choices will put you into your car of choice eventually.

 

Hang on to your hat, we may not come back this way.
Leasing may be the only alternative when you are 'upside-down', meaning the payoff on your current vehicle loan is greater than the trade-in value. Its also known as 'buried in your car'.

There are three routes:
1. you can add the amount of your debit between the trade-in value and the loan payoff to your owed amount of your lease if the dif is not too great. While that increases your mo payment, that one may be less than the combined two payments (your old vehicle and the lease)
2. You can lease the Fit and pay two payments, one existing and the new lease.
3. You can use credit card or personal loan to paydown the payoff to the trade-in value.

Here's examples of 1 and 3; 2 is self explanatory.:

Lets say your loan payoff on a Suburban was $7500.00 and your trade-in value was $5000. Lets say the lease on a Fit Sport AT with goodies is $17500 OTD with a maximum of 30,000 miles and you have $1000 cash to put down.. On a 3 year lease you could expect the wholesale value of the Fit to drop to 10,000. That means you'd ordinarily be paying interest on a !6,500 loan with a final value of 10,000 Let's saty the interest on 16,500 for 3 years is 20% or $3300. Adding the 3300 to the 16,500 becomes $19800. The lease is for $19800 less the 10,000 or 9600. Over 3 years thats $272 per month. And of course you'd be paying your existing car loan, too Say it was $400 so your total payments are $672 a month.

Now if you have a well connected finance manager and you have real good credit, here's what you may be able to do.
You lease the Fit as before but you add the difference between payoff and trade-in value to the lease value. Thats 16,500 plius 2500 or 19000. 20% on the 19,000 is 3800 and now the lease value is 22,800 The amount to pay on the lease is 22,800 less 10,000 or 12800 and the monthly payment is 356 per month, a lot better than $672. Plus you don't pay insurance on the Suburban.

There is a third way. If you can arrange a personal loan for $2500 with your bank or credit card company you can pay the 2500 from that to get the trade-in value even with the payoff and thus get your Fit leased as first stated. And of course you have to payoff the personal loan or credit card debt. But you eliminate the Sub's payment and insurance.

These are only examples so you can follow the process and in no way assures you can do this. (you could have a Hummer with a payoff of 25000 and a trade-in value of 2500; that would be hard to work even for a very enthusiastic and connected finance manager. Your credit score would be over 700 to boot)

But it gives an idea of what you can work with. And $4a gal or more may make this kind of situation a real budget-saver. one last note, the higher the MSRP of the Fit is the better your chance. And make sure you have a mileage limit you can meet or you'll pay heavy penalties. And at the end of the closed end lease you have first right to buy at the end of lease buy. Do not entertain an open end lease. The dealer then sets the end-of-lease price and if the Fit were a good deal then you will pay a high price.

Good luck. I'm done lecturing. Yeah, I do this for the ladies. And BTW don't expect the finance manager to agree with my simplifcation of finance rates. Its their job to make it look complicated so you'll have no clue what they did to you. Just look at the payments.

 

exactly. the first step to recovery is get out of debt as fast as you
can with a commited plan and not buy anything new as much as possible.

 

It's correct to say don't dig a deeper debt; however, there are times when merely keeping what you have puts you deeper without gain. A case where you are driving a 12 mpg vehicle that you have to drive 25,000 miles a year will cost $694 per month plus the payment and insurance. If you were to trade the $694 per month plus payment and insurance for a vehicle that gets 32 mpg and has a payment of $300 per month costs you $260 a month for gas plus insurance. That means you are reducing your monthly expenses by $130 a month.
And thast is getting you out of debt. It is not always best to hold what you have if you can buy something thast reduces your overall costs even as you pay for the alternative.
In this case whats going to happen when gas gets to $5 and $6 a gal?
Don't kid yourself that is the way its likely to be.

 

Thanks for everyone's reply i know your comments have helped me and others or will so in the future. I am Buried in my car which sucks, its a good car but the value of a 2004 Dodge SRT-4 w/ growing mileage (86,xxx as of right now) is eating its way down real fast! Which is why i asked. Im not jumping into anything as of yet. I just wanted a little re-enlightenment on my situation and what others might do.

thanks

Miguel

 

that doesn't constitue you to buy a new car. you can get a older
model beater that does over 27mpg for $5k and you're still better off
vs your old car and much more affordable than a new $15k+ Fit.

that's the point. you have to have common sense and be smart.

 

Look, another issue thats drawing me toward a newer vehicle is maintenance. My SRT is pushing its age and things are breaking. Me and my wife are at a point in our lives where we cant afford oil changes and new axles or new struts.

The dealership i visited is Guaranteeing Engine for Life, Oil changes for Life, and state inspections for Life. Its little things like this that drew us to thinking about future decisions in our lives to get new vehicles.

Im honestly tired of tinkering with a car every weekend because of something small, that may lead to a bigger issue. The SRT is a ticking time bomb, i know it. As of right now its completely stock, Axle is going out, Struts need replacing, and alot of Little things.

 

I'm guessing that dealership is Priority Honda in Chesapeake? Theres some pretty decent salespeople there, but with the fit your going to have to put your foot down big time in order to get the car at MSRP.

But i wouldn't get the car if you cant finance it, IMO leasing is just a waste of money.

You could also try selling the SRT in the VA pilot I've sold 4 cars in the past year through the paper. Took no more than 2 weeks for each.

 

if i was you, i would consider a used car GM/Hyundai/Kia
with warranty. if you want to dig yourself out of a hole
you have to do it like you mean it. that's just part of the
game.

tinkering around with short term luxuries will not get you out.

 

I hadn't really thought of any advice until I re-read the last sentence of the post above. When you say negative equity, is that compared to trade-in value or selling to a private party? Book value when selling to someone else is about 20 - 25% higher than trade-in . I checked the Neon SRT-4 at kbb.com for exact numbers. At 86,000 miles in good condition, private party is worth $1800 more than trade-in.

Beyond that, I'd take some of the other advice already posted. First, I think leasing is a waste of money. Unless you're in a job where you can be almost certain to make more money 3 years from now, leasing usually just leads to trouble. Also, if you have to go with something else used, so be it. The caveat I would add to that is to make sure it's a make/model with generally good reliability (so I would avoid GM and older Kias), and if you can swing it, get a Carfax report. Ford Focuses built 2002 and later are fairly reliable, but because it's a Ford, it doesn't have great resale value. I have a ZTS I bought used, and I'm happy with it. The Fit my wife and I bought replaced her Sentra.

 

Iv already told myself im staying away from the Domestic Market of vehicles. VW,Toyota, & Honda only!

 

How much negative equity do you have? You never did say what the trade in value they gave you was or what your payoff is.