The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: golffan63 on May 06, 2013, 04:25:24 AM
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I have put myself into a bad situation with a car loan of $49,880.70 for a 2011 Kia Sorento. The cost of the loan is 2.17%. I pay $295.53 bi-weekly and have remaining balance of $32,000. I put high mileage on, around 50,000 kilometers per year. I do get a car allowance of $600 a month that is taxable. The value of the vehicle if I were to sell would leave me with a loss of $10-12k. I have a TFSA with $11,000 in it. This is my emergency fund and aside from RRSP's is my only savings. I have $75K in RRSP's and an additional $22K in my work pension. I would welcome any advice on how to get out of this situation. Should I sell and cash in the TFSA and get myself into a less expensive vehicle or ride it out and drive the Sorento into the ground? I am 49 years old. Help!
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Would your car allowance go away / be reduced if you were to have a different car? Do you have to submit bills / receipts for reimbursement to claim it? If not then what I would do is wait until I have saved up enough money so that TFSA + new savings is enough to pay your losses and buy a reasonably priced used small car. Maybe one from this list: http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/ . You could do it now, but buying used cars is simpler / cheaper if you go direct to an individual seller and don't have to worry about financing. You can then continue getting the car allowance to pay for gas / maintenance / replenishing the TFSA.
If car allowance would go away or be reduced if you bought another car, then it's a harder question. In that case I would try to calculate it so that all my car expenses were covered by the allowance, and take maximum advantage of the money they were willing to give me.