Car debt

[msaltzma]

My wife and I purchased a '12 Jeep Compass for about $21,000. We traded in our '11 Jeep Liberty Jet due to poor gas mileage. They only gave us around $17,000 for our trade in and we owed $23,000. Diff of $6,000 so we put down $2,000 cash. With taxes/licensing fees that brings us to around $26,000 owed on the '12 Jeep Compass. Did we make the right call? We are still in the same situation, but with a new vehicle with better gas mileage, with about the same monthly payment.

[BMEPhDinCO]

No. You owed $23k, now you owe $26k + you paid $2k out of pocket. That means you spent $5k. If you really wanted to do something good, you could have kept the 2011 jeep. Or you could have sold it for $17k, paid down the loan to $4k, and bought a used car for $10k. Then you'd still be in the hole, but you'd only owe $14k instead of $26k - nearly half less.

You did what you wanted, and hopefully you like your new car, but from a financial perspective, that was not the right thing to do.

[bjl584]

My wife and I purchased a '12 Jeep Compass for about $21,000. We traded in our '11 Jeep Liberty Jet due to poor gas mileage. They only gave us around $17,000 for our trade in and we owed $23,000. Diff of $6,000 so we put down $2,000 cash. With taxes/licensing fees that brings us to around $26,000 owed on the '12 Jeep Compass. Did we make the right call? We are still in the same situation, but with a new vehicle with better gas mileage, with about the same monthly payment.

You should never base your finances on monthly payment. You need to look at total cost of ownership. You went $6000 upside down plus spent $2000 out of pocket to get into a new car. $8000 would buy a lot of gasoline. Plus, there may be increased costs with maintenance and upkeep and increases in insurance rates. Financially speaking, you made a bad decision. I would probably just keep the new car now. Get it paid off as quickly as possible and drive it into the ground.

You would have been better off trading down to something used and less expensive if fuel economy was a concern.

[JoeP]

You would have been better off trading down to something used and less expensive if fuel economy was a concern.

This is my thought as well. They could have had better mileage, and lower (or possibly no) car payment. Let someone else take the hit on depreciation.

[humandraydel]

You did what you wanted, and hopefully you like your new car, but from a financial perspective, that was not the right thing to do.

Hate to say it, but this is spot on. This is the classic example of trying to rationalize. Sorry OP, not to be mean, but did you calculate how much you will "save" in gas money? According to fueleconomy.gov, the average annual cost of gas to operate those 2 cars is:

2011 Jeep Liberty - 18 MPG (mix city/highway) - $3,300 per year
2012 Jeep Compass - 24 MPG (mix city/highway) - $2,300 per year

So, you paid $8,000 to save $1,000 per year?

[snafu]

OP, please don't be discouraged by the responses. Perhaps for future planning you'll present your views in advance of taking action so that we can offer suggestions for you to consider.