Got my dream car!, THEN did the math. Should I sell before the loan turns upsidedown?

I bought my dream car ~2005 Mercedes Benz S class. The car was 35,000. Its a 76 month (plus?) loan at 9% (due to the long term, not my credit) so my payments are low, about $500 per month. But at the end of this LONG loan, I will have paid 15,000 in interest!!! The dealer told me to just SELL/trade the car within two years so that I wont be upsidedown. How do I figure out how much the car will be worth and how much is left on the loan in advance? IS that even possible? He said that finance charges are applied daily, so if i sell early, I wont owe all that interest. (?)

I just want to know exactly how much time I have...

and I know - it was a bad decision to begin with. I THOUGHT buying would be better than leasing, but clearly, not.

... but the car IS gorgeous!

Got my dream car!, THEN did the math. Should I sell before the loan turns upsidedown?

There are online calculators for various kinds of loans. Playing around with one for a few minutes showed that if you were to overpay your loan by an extra $130 each month, you%26#039;d cut the term of the loan down to 6 years, while paying $10k over the lifetime of the loan.

Another thing you could do is make 2 smaller payments every two weeks, say $250 on the 1st and 15th. Since your interest accumulates daily, making the extra payments will reduce your principle, meaning less interest will build up between payments. (paying $300 twice a month will help reduce your total interest even more, obviously.)

Otherwise you can figure out how much will be left on the loan by using the forumula: I=Prt. P is the principle ($35000), r is the interest rate (9%, or 0.09) and t is time in years (2).

After 2 years you will have paid about $6300 in interest. This assumes you are making a single monthly payment.

Also during this time you will have made 24 payments at $500 each, or about $12000. Since $6300 was for interest, over 2 years you will have paid down $5700 against the principle, meaning you will have about $29300 of the original $35000 left. (I%26#039;ll let you figure out how much would be left if you were making larger payments...)

However, this doesn%26#039;t mean you%26#039;ll be able to sell your car for $29300. Remember, it%26#039;ll be 4 years old by then, and things like mileage and its maintenance record will also effect its resale price. I would recommend researching what a 4 year old Mercedes is worth now (the bluebook price), and compare that to its original price to get some idea of how much your car will be worth in 2 years time.

My gut feeling is that in 2 years time, the car would probably be worth about $15000-20000, depending on the mileage and maintenance. A car with low mileage and a good maintenance record will be worth more than a car with high mileage, for instance.

Got my dream car!, THEN did the math. Should I sell before the loan turns upsidedown?

Its quite difficult to know what a cars value will be in the future. The best way to guesstimate that is to go to KBB Online and do a valuation on a car just like yours but 2 years older and see what it value is today, thats about as close as you%26#039;ll get. a couple ways to %26quot;beat%26quot; the interest if thats your main concern is to make your payments as early as possible, and to make your payments larger than the minimum ie instead of sending in only 500 send 550 600-700 whatever you can afford.

Got my dream car!, THEN did the math. Should I sell before the loan turns upsidedown?

It is a simple interest loan, so yes, the interest is not paid up front. The interest is on a daily basis. Chances are, you are already upside down. Unless, there is a person who is willing to buy it from you for more than what you owe.

Best case, if you have the extra money, send it with the $500 payment. If you send in $700 per month the extra $200 goes to the principal not the interest. Try to pay it off early, or go to a credit union and refinance the loan for a lower percentage rate and shorter term. just keep in mind the payment can go up.

Got my dream car!, THEN did the math. Should I sell before the loan turns upsidedown?

You have another option. If you make your car payment, then pay extra and label it %26#039;principal only,%26#039; that amount will come off what you owe, and not the interest. As your principal comes down, your regular payments will go less and less towards interest, and more toward the principal because the interest is being calculated on a lesser principal amount. As an example, if you buy a house on a 30-year mortgage, and make 1 extra payment a year, you can almost pay the house off in 15 years (depends on lots of factors, but you can get the idea). If you intend to keep the car long-term, this will work very well for you, and you don%26#039;t have to worry.

If you choose to sell it, the dealer is right. Keep it 2 years, and care for it/drive it like it%26#039;s a lease (well cared for, low miles). 2 years is a common term for leases, and dealers will offer top money for those cars because they can make top money for them as used cars. You%26#039;ll get good trade-in money.

If you really like it, and want to keep it, though. Make your monthly payment, and put more down when you can.

Good luck!