Yup.
Let's use the example maxtor just proposed: A Hyundai Accent that you somehow got out the door with for a total of $4,495. And that you somehow didn't have to pay taxes, fees, or anything else.
Using that $4,495 amount as the base amount for a 5 year car loan at 8% interest, that makes the monthly payment $91.14.
Taking sonza's Lincoln as the example 'clunker' here and using the EPA estimated fuel economy, here's how the numbers work out.
Annual cost of Lincoln, $0 (already paid off)
Annual cost of Lincoln's fuel, assuming it gets the EPA calculated 18mpg combined and you drive the average 15K per year - plus that gas goes up to $5 per gallon (worst case scenario): $4166.67
Total annual base cost: $4166.67
Annual cost of Accent, $1093.68
Annual cost of Accent's fuel, assuming it gets the EPA calculated 18mpg combined and you drive the average 15K per year - plus that gas goes up to $5 per gallon (worst case scenario): $2500
Total annual base cost: $3593.68
Now, add to that the insurance upcharge for full coverage on a yearly basis (about $500/year average) which the bank will require since you haven't paid the thing off yet, and you're at $4093.68.
$4166.67 - $4093.68 = $72.99.
Why would you bother trading it in for a mere $73/year savings? Said savings would be wiped out in Texas by the taxes and fees you had to pay.
Quote correct. And we'll also assume the Lincoln in this case was owned either previously or currently by an older person which automatically means it is in good running order since Ford Modular V8's are almost bulletproof. There won't be any additional expense for maintenance that the Hyundai/Kia won't have in the same amount of time.
I wish it wasn't limited to gas guzzlers though. My mom could seriously use this but the PT gets up to 28 MPG
I've never seen a real world 28mpg in the PT Loser. That car is an abomination, you'll barely get 20mpg out of that thing. But, I do not want any car to be destroyed using this stupid cash 4 clunkers program which is nothing but a left-wing money sucking bullshit program designed to waste MORE of MY HARD EARNED tax dollars to the auto industry.
BritishRover said:
First off an 8% rate on a 60 month loan is well above the average. The average rate right now for a new car is around 6.9 and low rates without any special rates from the factory are around 4.9. At 6.9 we are talking bout $88.80 and at 4.9 $84.62 This also ignores that a third of the people doing C4C deals for us are cash buyers. These are cash deals where the car is 20,000 plus after the C4C deal. If we were selling 5,000 dollar accents there would be a lot more cash deals.
Does the Lincoln really get 18 mpg anymore though? Oh and you left the insurance cost out for the Lincoln which is at least a 100 dollars a year maybe more depending on the state for liability only. You also left out repair and maintenance costs for the Lincoln. How much is a worn out 15 year old Lincoln costing in repairs and maintenance a year? The Accent is under warranty for five years 60,000 miles bumper to bumper and 10 year 100,000 powertrain. Plus the annual maintenance for a new car that really only needs oil changes for the first three years or four years is much less then the old heavy Lincoln. A 1,000 bucks a year sound fair? Some years will be higher and some lower but you gotta figure a 1,000 minimum.
$5,266 - $4,708 = 558 That sounds like a much more meaningful number. Would be even more significant if the Lincoln or whatever other car had additional major repairs coming up. Maybe the brakes were about shot so a few hundred there and it needed tires so a few hundred more. That old engine probably burns oil too so there is an additional expense.
Actually no. Having worked at more than 1 car dealership as a new car sales person I actually have REAL WORLD experience in this field and 8% APR is about the average for new car loans from most lenders. To get anything 6.9% or less you need TIER ONE credit which is a 720+ beacon score (and really you need 750+). The average credit score is slightly below 720 for the three dealerships that I worked at.
Secondly you are way off on the insurance for the Lincoln too. The Towncar has a symbol rating of 10-13 which is LESS than the Hyundai/Kia by 2-4 points depending on the model/trim/engine size. And something you neglected is you only need Liability in most states for vehicles you own outright with no lien on it--in this case the Lincoln. You need FULL COVERAGE on that Hyundai/Kia (or whatever new car) which automatically doubles, triples or quadruples the insurance cost per year depending on the driver's driving record.
The following are quotes for me when I was looking at new cars with a clean driving record and being $28 years old.
12 month premium for a Lincoln Towncar:
$40.00 per month
x 12 months
--------------
$480/yr
12 month premium for a Hyundai Accent:
$85.00 per month
x 12 months
--------------
$1,020/yr
$1,020
- $480
--------
$540 more you'll pay for the Hyundai per year on insurance alone
So even if you replace the entire brake system in that Towncar @ $500 you'll still be out ahead. Plus this doesn't even take into account if you decide to get another vehicle which insurance and car payment will be really high.
Lets say you own a 1999 Ford Crown Victoria. You pay $40/mo for insurance ($480/yr) and the vehicle gets a combined average of 17mpg. 20 gallons of gas times $3.00 per gallon cost equals $60 per fillup. Lets say you drive 15,000 miles per year you'll spend $2,647 per year on fuel. And your 2010 Ford Focus gets 28mpg combined. And with a 13.5 gallon tank that is 40.5 gallons per fillup and $1,607 per year on fuel. Plus the cost of the Focus, which is $15,995 for the MSRP minus $4,500 for the C4C credit which equals $11,495.
Insurance.
1999 Ford Crown Victoria with symbol rating of 11:
$40.00 per month liability
x 12 months
--------------
$480/yr
2010 Ford Focus S Sedan auto with symbol of 15:
$100 per month full coverage
x 12 months
--------------
$1,200/yr
$1,200
- $480
---------
$720/yr
1999 Crown Vic is paid for.
$0 per month
x 12 months
--------------
$0/yr
2010 Ford Focus S Sedan auto
$15,495 MSRP
- $4,500 C4C credit
----------
$11,495
2010 Focus payments broken down monthly with a reasonable 6.9% APR + $1,000 down payment extra.
$11,495
- $1,000
----------
$10,495
$10,495 with an APR of 6.9% @ 48 months (4yr which is the average loan time for purchase) you are going to have a monthly payment of $250.83.
Now lets break down the yearly cost of the Crown Vic and 2010 Focus.
Yearly & monthly cost of the 1999 Ford Crown Victoria with some routine maintenace done at a service center paying the high labor cost by not doing it yourself:
$0 car payments
+ $480 insurance
+ $500 brakes
+ $200 radiator
+ $120 waterpump/thermostat
+ $150 belts
+ $400 tires
--------------
$1,850/yr
$1,850
/ 12 months
--------------
$154.17/mo
Yearly & monthly cost of 2010 Ford Focus S Sedan automatic:
$3,009.96 car payments
+ $1,200 insurance
-----------
$4,209.96/yr
$4,209.96
/ 12 months
--------------
$350.83/mo
$350.83 Focus monthly
- $154.17 Crown Vic monthly
------------
$196.66/mo
You save almost $200 per month by not trading your Crown Vic in. Plus I'm not even being pedantic by including the cost of the energy of the factory producing the Focus and its impact on the enviornment (using coal power plants).