Almost Sold the M3. Making Future Bet Instead.

Almost sold my car. About a week ago I
decided that I was spending too much money
on a car given the fact that we now own a
house and will be getting married soon.

So I started to sell the M3. The car
itself is valued by Kelly Blue Book on a
private sale at $36800. I owe the bank
$41750 on an original loan of $55k. So I
put it up for sale at $39750. Early in the
process I was willing to eat about $2k.

Then I looked at the reality of eating
$2k. I plan on cutting my monthly payment
to save about $500 per month. Eating $2k,
absorbing the standard closing costs and
paying taxes on a new car valued somewhere
around $23K I'd spend $3k to make the
switch. Then I'd need to get a warranty
for the used car. To compare apples to
apples, the M3 has about 20K miles
remaining on its warranty. So I'd need to
buy 20K miles worth of warranty for a
$23000 car. My guess is that this would
cost me about $1000.

My break-even date was six months or more
out. Not bad.

But here's the thing: my simple interest
loan on the car is finally catching up with
the street value of the car... or it seems
to be. After riding the ugly depreciation
slope of new car ownership I'm finally
paying more each month than the car loses
in value each month. My hope is that in
six months
I'll be able to sell the car without eating
$2k.

So, that's my bet... that in six months my
car will sell for the same amount that I
owe the bank. If I can do so then I've
driven the car for an extra six months
while spending the same total amount of
money that I would spend by selling it now.

A post-war economy may help me. The
payments I make each month now amount to
more than the monthly depreciation on the
car... that helps me.

Any damage to the car will hurt me. If the
economy stays slow it will hurt me. If car
loan interest rates go up it will hurt me.
If BMW announces a new M3 model it will
hurt me (they're not planning on doing so
until 2005/6).

It's far from a perfect bet. In fact, I'm
not sure that I'm not making a bad
decision here. I wonder if I shouldn't
just
take the $2k hit now and lock in my break-
even date. I guess the bottom line is that
there isn't any urgency to sell. Still got
the same job, savings etc. If I felt that
I really
needed to sell the car I certainly would.
At this point it's just a general desire to
save money for our eventual hypothetical
family.

So I'll see how the car market is doing in
six months. As a side note, I do have the
car on the
market at autotrader.com, but it's at
$42,500... still in
line with M3's that have similar miles and
features... but not at the great deal that
$39,750 was.

Any takers?