So you want to buy a used car and you see an ad online from someone selling a vehicle looking for someone to take over payments and possibly even having the audacity to ask for a down payment?
Here is why you should either 1. Avoid doing this all together or 2. Negotiate with the person with the information I give you.
To keep things kinda simple, we’ll discuss in terms of a basic 3 year lease of a vehicle. We all know that any vehicle depreciates the most in the first year… pretty much in the first day you drive it off the lot, right? So the first year of the lease the car could depreciate at a rate of $700/mo., since this is where most value is lost. Now in year two, when depreciation slows down a little bit, you could only be paying $500/mo. Finally in the 3rd year it may only depreciate at a rate of $300/mo. When you average that out over 3 years you will then be paying $500/mo. for your lease, so that will be your payment in the agreement. The cost is under represented in year 1 and over represented in year 3.
So when a person is wanting you to take over their payment, they should really be giving you a down payment if you’re going to be paying part of their deprecation for year 1. It’s really not fair for them to drive a brand new car and for one year and then try to have someone else pay into that year 1 deprecation. I would advise doing some research on KBB first if you are looking to take over payments to purchase the vehicle so you don’t end up paying more than what the vehicle is worth.
However, if your a taking over payments for a vehicle that is being purchased then this may be to your advantage since the opposite takes place. The entire car is being depreciated over a short period of time, 3-5 years. They most likely put a down payment, so that helps offset that initial depreciation when taken off the lot. We all know that the car holds value after it has been completely paid off. In this case it could be advantageous to put a down payment if asked by the seller if the payments were high and there is only a year or two left to pay.
All in all, do your research and add up how much you’ll end up paying after all the payments. Compare that against the actual value of a car to see if you’re really getting a good deal or not. Leave your comments below and follow me on Twitter @rayholt.