In January, I bought a car, replacing my $400/month mortgage payment with a $325/mth car payment. The car a 2004 Malibu with 25,000 miles (now 27,000) is the nicest thing that I have ever owned. Since January I realize I should sell this, even though it is the nicest thing I own. (I became an FPU member last month). Problem is Kansas no longer sends the title w/ lein to the owner. They instead have the lender (in my case a lender in some Tennessee). How do I sell my car in this case? Selling this $15,000 car will pay off most of my $19,000 debt. Though I will need to find another cheaper car. Doing this also would pay my debt off by the end of the year.
As I say on my personal finance blog, http://www.debtfree4ever.net, I currently only have a little over $100 in my emergency savings. I only make $19-20 k/year (not counting an additional income). My utilities, end up being 32% of my income. I believe, if I really push it, I could, if I kept my car, pay extra payments to the car people, I could pay it off in 24 months instead of 72 months. Looking to get your advice on this specific situation. I will be listening tonight (Wed) after my FPU class, which gets out at 8:30 PM CT.
What do you the readers think?
I'm sorry, but I think Dave will tell you to dump the car. I don't understand how you are upside down on a car bought used five months ago. I'm afraid it was too much car for your income. Also, I don't think paying it off in 24 months is realistic. If you make 20k, and your utilities are 32% of that, you are spending ~$6400/yr. To pay off the car in two years, you basically have to pay $10k/year. Then you have to eat, actually drive the car, thus put in gas, change oil once in a while, etc.
ReplyDeleteAs Dave would say, I want you to own nice things, I just don't want you to be a slave to the bank.
LAmoney -
ReplyDeleteI think you missed something, my main question was asking how to sell it in the situation posed. I then went on to explain that I had an additional $300/mth income from another source that I could use to pay the car down in 2 years rather then 6 after I use that other source to establish my emergency fund.
You're going to pay interest on your car, and the auto loan note says how much over its lifetime. You're absolutely right that paying it off in 2 years rather than 6 would cause you to pay *less* interest. But how much would you end up paying? More than $15,000, I can tell you that. And that's the real cost of your car.
ReplyDeleteI drive a 1983 Honda Accord that someone just gave to me cuz it wasn't worth more than $500. It's a champ! Mostly I ride a coaster scooter and take the bus. I've saved $17,250 (rather proud of myself). If I want a shiny car, I'll pay cash. And for once the real cost will be settled on the day I buy it, not over the lifetime of some loan.
(Alternatively, you could finance $15,000 at 0% and your accelerated payments would go a lot further. Crazy talk, I know.)
I'm not sure of the logistics of selling a car on which you are upside down. I would call the lender and ask them.
ReplyDeleteDid he respond to your email on the air?
lamoneyguy -
ReplyDeleteDoesn't sound like. The show isn't live here, being that its on 7-10. So after I got out of my FPU class all I heard was the last hour and a half and from his comments all 3 hours he addressed business people or what he called "EntreLeadership."
Anonymous -
ReplyDeleteyou are correct...however consider the loan itself is not $15,000 anymore as I have paid on it...part of that $15,000 is the credit life that the Auto Insurance gets away with requiring you to buy from them (no other loan can require you to buy it from them). If I got $15,000 today, it would be paid off entirly....as the interest would stop. If I am able to pay it off in 2 years rather then 6, I would save lots of $$$ in interest. Of course the wisist thing, and what I really don't want to do, is sell the car now and pay off the loan. How I do that since, Kansas no longer sends the title to the holder, rather to the lein holder. In my case the lien holder is in another state.