need help explaining this

**ansley** · 08-19-2008, 01:52 PM

DH owes about 8,000 on a truck that has a resale value of about 11,000, trade in of about 5,000. He wants to trade it for another truck that the dealer wants about 7,000 for (fair resale, we looked it up). DH wants to trade his truck (with dealer doing a payoff) and 1,500 for the other truck. The way I have this figured this would put the dealer in the red about 6,500 - the second truck + dh's current truck. DH said that was okay because the dealer would sell his truck for 11,500 and have a 5,000 profit. If I include the second truck that to me would mean that the dealer could come out even (they said they had about 3,500 in the second truck) or some in red because of overhead. This would not be a fair trade for the dealer in MHO. Am I thinking about this right? If so, how do I explain it to DH? He is trying to get out of debt. I told him we are upside down in the truck and we just need to make a plan to pay it off and not get any more debt. Was that the right thing to say? He has been so resistant to changing and I am encouraged that he is thinking about it. I don't want to drag him down but if it doesn't work I am worried that will drag him down even more.

**Greebo** · 08-19-2008, 02:00 PM

Originally Posted by ansley

DH owes about 8,000 on a truck that has a resale value of about 11,000, trade in of about 5,000. He wants to trade it for another truck that the dealer wants about 7,000 for (fair resale, we looked it up). DH wants to trade his truck (with dealer doing a payoff) and 1,500 for the other truck. The way I have this figured this would put the dealer in the red about 6,500 - the second truck + dh's current truck. DH said that was okay because the dealer would sell his truck for 11,500 and have a 5,000 profit. If I include the second truck that to me would mean that the dealer could come out even (they said they had about 3,500 in the second truck) or some in red because of overhead. This would not be a fair trade for the dealer in MHO. Am I thinking about this right? If so, how do I explain it to DH? He is trying to get out of debt. I told him we are upside down in the truck and we just need to make a plan to pay it off and not get any more debt. Was that the right thing to say? He has been so resistant to changing and I am encouraged that he is thinking about it. I don't want to drag him down but if it doesn't work I am worried that will drag him down even more.

First of all - why are you worried about the dealer's end of the deal? If the dealer accepts the deal, great. If not, so what? That's his business problem, not yours.

Secondly, if the truck has a resale value of 11 but a trade in of 5, I'm concerned that one of those numbers is way off base. That's a HUGE spread.

Thirdly, if you owe 8, can sell it for 11, and have 1.5 laying around, then sell it to a private buyer for 11, keep the 3, add the 1.5, and buy a 4.5 k truck, cash.

How long will it take you to pay off the truck if you throw every penny you can at it?

**FrugalMomof3** · 08-19-2008, 02:05 PM

Very well said Greebo

**cissylu** · 08-19-2008, 02:08 PM

yep greebo you did it again . well said.

**mommy4ever** · 08-19-2008, 02:14 PM

If you owe 8k, trade in for 5000, there's a 3000 deficit. You'd need to add $3000 to your current loan to make it $11000

If the dealer can sell for 11000, you should be able to sell privately for about 10000. But the new truck for $6500 and through $3500 on that $8000 loan. leaving you with a loan of $5500.

Trade in doesn't make sense.... am I missing something?

**Russ** · 08-19-2008, 02:20 PM

The used market is loaded right now with used trucks. Everybody is dumping them for more fuel efficient vehicles.

What year/make/model and mileage is his truck?

**Persimmon Lace** · 08-19-2008, 03:23 PM

What Greebo said.

**Cricketlegs** · 08-19-2008, 04:18 PM

Originally Posted by ansley

DH owes about 8,000 on a truck that has a resale value of about 11,000, trade in of about 5,000. He wants to trade it for another truck that the dealer wants about 7,000 for (fair resale, we looked it up). DH wants to trade his truck (with dealer doing a payoff) and 1,500 for the other truck. The way I have this figured this would put the dealer in the red about 6,500 - the second truck + dh's current truck. DH said that was okay because the dealer would sell his truck for 11,500 and have a 5,000 profit. If I include the second truck that to me would mean that the dealer could come out even (they said they had about 3,500 in the second truck) or some in red because of overhead. This would not be a fair trade for the dealer in MHO. Am I thinking about this right? If so, how do I explain it to DH? He is trying to get out of debt. I told him we are upside down in the truck and we just need to make a plan to pay it off and not get any more debt. Was that the right thing to say? He has been so resistant to changing and I am encouraged that he is thinking about it. I don't want to drag him down but if it doesn't work I am worried that will drag him down even more.

You owe 8000-5000 trade=3000

3000+7000=10000

so you would owe 10,000 on the new truck.

Now the 1500 is that cash you have towards the new truck??

If so that puts you at 10000-1500=8500

Better to pay off the 8000 truck and if the 1500 is cash use that for debt reduction either on other debt or extra on the truck you have already.

Can I ask what your payment is? If that isn't too personal??

**stinkbug** · 08-19-2008, 06:07 PM

I am still trying to figure out why you are getting rid of (trading in) the truck you have now??

**ansley** · 08-20-2008, 12:24 PM

Originally Posted by Greebo

First of all - why are you worried about the dealer's end of the deal? If the dealer accepts the deal, great. If not, so what? That's his business problem, not yours.

Secondly, if the truck has a resale value of 11 but a trade in of 5, I'm concerned that one of those numbers is way off base. That's a HUGE spread.

Thirdly, if you owe 8, can sell it for 11, and have 1.5 laying around, then sell it to a private buyer for 11, keep the 3, add the 1.5, and buy a 4.5 k truck, cash.

How long will it take you to pay off the truck if you throw every penny you can at it?

I was trying to explain to DH why the dealer didn't like the idea. My DH used to work with these people and I would like for them to stay on good terms. Maybe resale was the wrong word. I am new to all these terms. We looked it up on KBB and the 11,000 is what a dealer would sell it for and the 5,000 is the trade in value and I don't remember what the owner sell value was listed at. I think it was a little over 7,000. So if we sold it for what KBB says we can we would be about a -1,000. We are in the red on the budget as it is so we are lucky to pay min on everything.

Originally Posted by rcannon

The used market is loaded right now with used trucks. Everybody is dumping them for more fuel efficient vehicles.

What year/make/model and mileage is his truck?

Yes, trucks and SUVs are just sitting in our area right now. 2001 Ford F-150 4 wheel drive etc. I don't know the mileage. I think around 129,000 is what he used on KBB.

Originally Posted by Cricketlegs

You owe 8000-5000 trade=3000

3000+7000=10000

so you would owe 10,000 on the new truck.

Now the 1500 is that cash you have towards the new truck??

If so that puts you at 10000-1500=8500

Better to pay off the 8000 truck and if the 1500 is cash use that for debt reduction either on other debt or extra on the truck you have already.

Can I ask what your payment is? If that isn't too personal??

His truck + 1,500 (per KBB) would be 12,500 to the dealer, that - 8,000 pay off = profit of 4,500 for both trucks which = 2,250 per truck for the dealer. I told DH we just needed to keep the truck and go from here. The payment is 250.

stinkbug, he wants to trade his truck + 1,500 for another. That would mean we would owe 1,500 instead of 8,000.

**Greebo** · 08-20-2008, 12:35 PM

Originally Posted by ansley

stinkbug, he wants to trade his truck + 1,500 for another. That would mean we would owe 1,500 instead of 8,000.

What you would owe depends on the value of the other truck. You said dealer wants 7000 for that truck.

So you currently owe 8k and the dealer would give 5. That means you would owe 3 left over. Then you buy the 7k truck, making you owe 10. If you pay 1,500 cash on top of that, now you owe 8.5k

Net result, your position worsens by $500.

**Cricketlegs** · 08-20-2008, 01:03 PM

Originally Posted by Greebo

What you would owe depends on the value of the other truck. You said dealer wants 7000 for that truck.

So you currently owe 8k and the dealer would give 5. That means you would owe 3 left over. Then you buy the 7k truck, making you owe 10. If you pay 1,500 cash on top of that, now you owe 8.5k

Net result, your position worsens by $500.

I am glad I am not the only one who sees the math this way. I was getting worried.

My understanding is this----Buyers will give you blue book value on a car. They then turn around and sell that car at a profit.

Why would the buyer give you the amount they would sell the car at profit.

That is bad business.

This is why I am confused. I did the math--you end up owing more unless as you said, the buyer is doing you a FAVOR and this is not a typical business transaction.

**ansley** · 08-20-2008, 01:04 PM

Originally Posted by Greebo

What you would owe depends on the value of the other truck. You said dealer wants 7000 for that truck.

So you currently owe 8k and the dealer would give 5. That means you would owe 3 left over. Then you buy the 7k truck, making you owe 10. If you pay 1,500 cash on top of that, now you owe 8.5k

Net result, your position worsens by $500.

Sorry, I wasn't clear. That is the deal DH wants the dealer to take. I am asking for help explaining to DH why that will not work.

DH's deal:

His truck + 1,500 (per KBB) would be 12,500 to the dealer, that - 8,000 pay off = profit of 4,500 for both trucks which = 2,250 per truck for the dealer in profit. My thinking is that, dealer has about 3,500 in the other truck (per sales person) so you have to - that from the 4,500 profit to = 1,000 which would = 500 in profit on each truck.

ETA: - overhead and the dealer could be in the red on this deal. Not gonna happen.

**Cricketlegs** · 08-20-2008, 01:09 PM

OHHHHHHHHHH. Well then my last post explains it.

It is not sound business for the dealer to do that. He won't make any money.

They count on resale value being up, tradein value being low and also having to tack on extra if the trade is worth less than you owe.

My dh works for the local Chevy dealership( not car sales) but I know this is how it works.

**ansley** · 08-20-2008, 01:13 PM

Originally Posted by Cricketlegs

OHHHHHHHHHH. Well then my last post explains it.

It is not sound business for the dealer to do that. He won't make any money.

They count on resale value being up, tradein value being low and also having to tack on extra if the trade is worth less than you owe.

My dh works for the local Chevy dealership( not car sales) but I know this is how it works.

My dh used to work for Ford (also not in sales). You would think he would understand all this.