Q: I bought a three-year-old Nissan Micra SV, and I’m finding it too small compared to my old PT Cruiser. I paid $10,500 for it in April 2018, and I’ve only made the first four payments of $158 on my six-year loan to date. The car has an automatic transmission and air conditioning. Should I sell privately or take it to a dealer?
—Marion S, Ontario
A: The Micra is a good urban commuter, and popular with the back-to-school crowd, but their buying season has now passed and your car just turned another year older with the autumn model year changeover. John Wallischeck, a used car dealer in Greater Toronto, offered the following appraisal of your situation: You have a rock-bottom monthly payment; to drive a different used vehicle selling in the $10,000 range, say a larger hatchback like your old PT Cruiser, you will need to budget $250 to $300 a month for car payments on a 60 month loan at market rates. And you will lose plenty by trading now. Wallischeck provided the following values for your Micra:
Trade in to a dealer: $6,500-$6,900
Private sale: $7,900
Dealer sale: Advertise for $8,900; drop price to $8,500 for a motivated buyer
I suspect the four payments you made and any down payment applied from the PT Cruiser will be insufficient to fully pay off the rest of your loan this early, even with a reduction for the unearned interest. That’s called being “upside down” in the car business; dealers love “upside down” customers because they’re often more concerned about getting out of a tight spot than the overall cost of their obligation.
What usually ends up happening is that the customer tries to soften the burden by stretching out their loan (72 or 84 months is a long loan for a four-year-old vehicle financed at market rates), or switching to smaller but more frequent bi-weekly payments. Both of these “solutions” may appear cheaper because the individual payments are smaller, but the deal will impact your personal finances negatively. You’re certain to be paying $100-$150 more per month for the privilege of driving a larger vehicle, or about $7,000 to $9,500 over the remaining life of your current auto loan.
So the answer to the question about whether to sell your Micra privately or to a dealer is… neither! Your loss on resale will be significant enough that you should keep the car a good while longer unless your personal finances can take the hit or a particular reason related to this model makes the car totally inappropriate for your needs. The final lesson for people changing their class of vehicle: You’ll likely need more than a short test drive before making your decision. Rent or borrow a similar vehicle and try to spend at least a couple of hours behind the wheel on roads you know.
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