Help me make sense of financing
Hi,
I'm embarrassed to admit that I'm confused about best way to structure my financing deal, asking for the wisdom of who has done it before here (I am sure many have).
I paid cash for my current rig in 2016, around $24k, owe nothing on it.
Private sale retail, when spring comes, I think I can get around $17k for it.
I have a $60k fifth wheel on order, due in Feb.
My dealer is offering $13.5k trade in value.
If I am doing my research correctly, it makes a lot more sense to do the following:
Finance the total amount of the new fifth wheel, sell my old rig privately, and then apply the proceeds towards the new rig's loan as a principal reduction.
Here is what I am seeing:
I plan on financing for 180 months, to keep cash flow as attractive as possible. However, I plan on only keeping the rig for maybe 48 months.
Using the $17k as a principal reduction on the financed amount allows me to jump ahead on the amortization schedule, and I will have more equity at 48 months vs allowing the trade-in to reduce my financed amount, or using the $17k as a downpayment (should I sell my current rig before the new one comes in).
Using the $17k as a principal reduction also means I have paid less interest at 48 months vs the other two scenarios.
Bottom line, if I am doing my research correctly: don't use the cash from my current rig's equity as a downpayment (or trade-in). Sell it privately and use the proceeds as a principal reduction on the new rig's loan.
I plan on using GoodSam, and they do not have a prepayment penalty.
I realize that I can reduce my tax burden on the new rig by trading in my old one, but the savings is only about $800.
Risk here is that I don't sell my current rig for a while, but even if I fire sale it at $13.5k, the trade in amount, I am still better off as a principal reduction on new one?
Am I missing anything?
Thanks,
Dave
I'm embarrassed to admit that I'm confused about best way to structure my financing deal, asking for the wisdom of who has done it before here (I am sure many have).
I paid cash for my current rig in 2016, around $24k, owe nothing on it.
Private sale retail, when spring comes, I think I can get around $17k for it.
I have a $60k fifth wheel on order, due in Feb.
My dealer is offering $13.5k trade in value.
If I am doing my research correctly, it makes a lot more sense to do the following:
Finance the total amount of the new fifth wheel, sell my old rig privately, and then apply the proceeds towards the new rig's loan as a principal reduction.
Here is what I am seeing:
I plan on financing for 180 months, to keep cash flow as attractive as possible. However, I plan on only keeping the rig for maybe 48 months.
Using the $17k as a principal reduction on the financed amount allows me to jump ahead on the amortization schedule, and I will have more equity at 48 months vs allowing the trade-in to reduce my financed amount, or using the $17k as a downpayment (should I sell my current rig before the new one comes in).
Using the $17k as a principal reduction also means I have paid less interest at 48 months vs the other two scenarios.
Bottom line, if I am doing my research correctly: don't use the cash from my current rig's equity as a downpayment (or trade-in). Sell it privately and use the proceeds as a principal reduction on the new rig's loan.
I plan on using GoodSam, and they do not have a prepayment penalty.
I realize that I can reduce my tax burden on the new rig by trading in my old one, but the savings is only about $800.
Risk here is that I don't sell my current rig for a while, but even if I fire sale it at $13.5k, the trade in amount, I am still better off as a principal reduction on new one?
Am I missing anything?
Thanks,
Dave
