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I purchased a 2015 Ford Focus in August of 2016 with a loan for $15,700 for a term of 71 months. I've been paying $257 a month and have the loan down to $12,370. I decided to go back to school to do a graduate program so I reduced my work hours and am going to have trouble making this and the $150/month insurance payment every month.

So I'm thinking to sell it and buy a used car. My first and only other car I bought off Craigslist for $2000 cash and sold for the same price in cash later the same year. This is different. This is how I think it would work:

I sell it for the apparent market price of around $11k. This money would be paid to me so that I could then purchase the used car for ~$2-3k. Then I pay the remainder to my car loan account. At that point would I just refinance to get the monthly payment under $100? Am I missing any complications other than the mess of timing the buying and selling so I can still get to school and work throughout all of this?

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    I think you are complicating things by considering the purchase of your new car + sale of your old car as a single transaction. There is no need to buy your new car before you pay off your loan to the bank. – Grade 'Eh' Bacon Jan 16 '18 at 21:33
  • Would you be able to refinance the car loan after you sell the car? One aspect of car and home loans is that they are secured loans. After you sell the car you have sold the asset that the bank would want back if you default on the loan. In many (most?) situations the car loan would also place a lien on the car title, you could not sell the car with a clear title until the loan was paid off or the bank agreed to remove it. – Freiheit Jan 16 '18 at 21:39
  • That insurance rate sounds really high to me, I insure two more expensive cars for less than that, maybe shop around for a better price? – Hart CO Jan 16 '18 at 21:53
  • @Grade'Eh'Bacon I think he's point was that in order to purchase the "new" car, he needs to first pay off the loan. The loan balance is $12k, the amount he'd get selling the car is $11k. Clearly, he has to sell the car first, buy his new car second, then ideally, get a loan for around ~3k to "refinance" his loan (using that plus his remaining 9k to pay off the balance). In practice, the lien on the car will mean this won't work. – iheanyi Jan 17 '18 at 16:18
  • @iheanyi Agreed, unfortunately. The terms of the OP's current loan likely stipulate that the car cannot be sold to a 3rd party. Using those funds for any purpose apart from maintaining ownership of the original car would be a violation of those terms (again, most likely, but of course I have no idea what the agreement actually says). To buy a new car would likely require either saving up cash or getting another loan. – Grade 'Eh' Bacon Jan 17 '18 at 16:20
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Am I missing any complications...throughout all of this?

Yes. Whoever you borrowed from to finance the purchase of your car probably has a lien on it. If this is the case, then you cannot sell the vehicle without paying off the loan. This means that you will either need to cough up any extra cash to pay off the remainder of the loan after sale and/or finance your next vehicle.

  • Ah. I thought it sounded too easy. Thank you. Yes, the bank shows as the lien holder on my registration. So would my best move right now while making ends meet be to post it for sale for $2k over the loan and see if anyone is interested? It's a nice clean car with 60k miles. Someone might be interested right away. – TQuile1948 Jan 16 '18 at 22:05
  • "post it for sale for $2k over the loan and see if anyone is interested?" Can't hurt. But everyone looks at sites like kbb.com for used car values, so the best you'll get is the upper range for your vehicle's "quality level". – RonJohn Jan 16 '18 at 23:41
  • @TQuile1948 good luck figuring stuff out. It seems like you're on the right track though! – Nosrac Jan 17 '18 at 14:20
  • @RonJohn alternatively, if he can come up with the $2k himself, he could sell at the correct value and put up the extra to clear the loan. He'd need to work that out with the lienholder first. – iheanyi Jan 17 '18 at 16:27
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    @TQuile1948 don't list it for an arbitrary $2k above the loan. That might be too high (nobody will buy it) or too low (and you'd miss out on $). Go to KBB.com and Edmunds.com and figure out what the market price is for your specific vehicle and post it at that price, more or less. – stannius Jan 17 '18 at 17:12

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