Author Topic: How to best handle my idiotic Pre-Mustachian Motoring Mishap  (Read 3538 times)

Munee

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How to best handle my idiotic Pre-Mustachian Motoring Mishap
« on: April 18, 2014, 09:58:57 AM »
Hello all!

This is my first post on the forums, but I have been devouring all of MMM's posts since I learned about the blog last week. Virtually all of the advice and ideals resonate with me and I am on-board with the lifestyle and ready to start cutting expenses like there's no tomorrow (all though cutting expenses and saving is done to have[ a better tomorrow, but you get the point).

There's just one small (read: huge) problem that I am facing; my 2014 Nissan Versa Note that I *shudders* fully financed *cough cough cough*. Yes, I know, what was I thinking? Well, I was working as a car salesman at the time and my current hand-me-down '93 Cadillac Deville decided it was done with me. Naturally, I did what a good consumer should do and I bought a brand new car with no downpayment and an obscene interest rate! I was 19 years old at the time (now 20) and I had no credit history, I have no idea how I was able to receive financing in the first place.

In my defense, it's the most Mustachian new car I could possibly buy, right? RIGHT? I mean, it's a base 5-speed hatchback with manual windows and I average 38mpg in it! No, I know; I am a moron.

Now for the painful part. I work 24 miles away from my apartment in the gridlocked Mustache-Dystopia of Dallas, Texas. I bought this car in September of 2013 and I am already about to cross the 20,000 Mile mark. According to KBB, that means my car is worth about 10k and that is without factoring in the depreciation from the dents/scratches in my bumper from the 91 year old lady who backed in to me in a parking lot (her license was literally expiring the next day, why was she on the road?!?). The insurance companies are jerking me around and she is blaming it on my brother who was driving (parked) at the time, but I digress.

So, my car is worth roughly 10k and depreciating rapidly, and I owe 15k! on it. My interest rate is 11.93% and it is on a 72 month note... God, that hurts to type.

I really do not know how to handle this. I will be moving to within 5 miles of my workplace within the next 4 months and I plan on biking as much as possible. I want to buy a used xA, Versa Hatch, or Yaris for ~6k and pay it off as soon as possible to eliminate my car payment and only be required to maintain liability insurance. Though, before I do that I must deal with the current situation. I am going to try to refinance to a lower rate and pay it down to the point that I am no longer upside-down on the note and then sell it. Is that really my only intelligent option? Perhaps I should just pay the entire note off as soon as possible and keep the car until it falls apart? Any and all advice (proceeding the face-punches) is appreciated.

Thanks ahead of time!

MayDay

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #1 on: April 18, 2014, 10:05:23 AM »
I don't think it's a bad idea to pay it off asap and keep it for 20 years.

I think it comes down to how fast can you pay it off? How much extra room do you have in your budget? If you can pay it off within a year, I would lean towards keeping it because it is an economical choice and you know it's history.
« Last Edit: April 18, 2014, 10:36:04 AM by MayDay »

luigi49

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #2 on: April 18, 2014, 10:12:37 AM »
Dont be hard on hyourself.  You didn't buy an unreasonable car so the best thing is just pay it off and keep it. 

CarDude

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #3 on: April 18, 2014, 10:33:41 AM »
Relax and pay it off. It's that's the biggest financial mistake you make in this life, you'll be far ahead of 99% of your peers.

eil

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #4 on: April 18, 2014, 01:15:51 PM »
Greetings Munee!

How long ago did you buy this car? The Nissan website says the MSRP on this car is $14,000. I know there are additional fees, taxes, and whatnot involved but unless you've been making teeny tiny payments and just bought it a couple months ago, I'm confused as to how you owe $15,000 on it? Were you not able to get it at dealer cost, despite working at the dealership?

The bad news: There's nothing you can do at this point to get that depreciation back. It's a sunk cost.

The good news: As others have said, is that you have a pretty Mustachian car, overall. I'm not sure whether it shows up on MMM's list of cars for smart people, but it's probably a keeper. (Just make sure to keep up on that biking habit!)

Maybe I'm not hip to car loans, but the 12% interest rate sounds pretty damn ridiculous. This kind of interest rate is definitely a hair-on-fire emergency. If you can't pay it off right away, call around to your local credit unions for their rates. Back in my stupid years, I financed two used vehicles though a local credit union and the interest rate was only somewhere around 3% if I recall. (Paid off both way early, at least.)

Well, anyway, you've learned an important lesson: Never ever buy a brand-new car. They depreciate like nothing else I can think of. Next time you so much as consider buying a new car, you'll remember what 33% depreciation in less than a year feels like.

Munee

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #5 on: April 18, 2014, 01:45:52 PM »
Thanks for the advice everyone! I didn't intend to sound so worried or frantic, I tend to over-dramatize my writing in the effort of making it entertaining, ha.

As of right now, I am thinking keeping it, refinancing for a lower rate, and paying it down like crazy would be the best course of action, since the depreciation hit has to be factored in to the cost of selling it to buy a used car.

Eil: The MSRP is $14,XXX and after TTL + "dealer adds" the total note came out to just a bit over $16k. The interest rate is indeed ridiculous, that's why I am looking to re-finance. I joined PenFed CU last week and I am in the process of getting a derogatory mark removed from my credit (long story, I swear i'm not as financially inept as I sound!) so that I have a chance of lowering my rate significantly.

My lesson has certainly been learned. I am normally the person that researches things for hours before even considering a purchase, but this car purchase was very rash and reactive to the frustration of my previous car breaking down. Never again! At least I chose a very Mustachian car.

Further replies and insights are welcome!

Thanks again

JPinDC

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #6 on: April 18, 2014, 02:03:41 PM »
Until you can get the loan balance less than what you're trying to sell for, you're not going to be able to sell it. That interest rate is crazy, so I'd throw whatever you can at that for now, and back off any other investments until it's paid off or at least re-financed. If you can't get it re-financed, it may be worth selling it and buying a used car IF you can get a lower interest rate. If not, then you're not really going to be saving much.

Thegoblinchief

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #7 on: April 18, 2014, 03:09:42 PM »
Refinance (only if it's no or very low-cost) ASAP.

Pay it off as soon as you can, unless the new note somehow ends up being below 5%, in which case invest the difference.

I'd keep it at this point, regardless, just don't let the debt service kill you. Even if you were to pay it off TODAY, the sweet spot for reliable used cars for a non-DIYer is between $5-$10K. In your case, by the time you pay the car off, the added depreciation probably won't net you that much cheaper of a car.

Milspecstache

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #8 on: April 18, 2014, 04:36:05 PM »
I have a Versa getting the 38mpg (via the manual) and love it for its cost effectiveness, predicted reliability, and safety features.  Based on the fact that you already have some cosmetic damage you would take an add'l loss to sell it so definitely keep it.  Should do you well over the next few years.

Pay it off if you can do it quickly.  If not, refinance.  Are you a member of a bank or credit union?  They should give you a refi with a much better rate.

Munee

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Re: How to best handle my idiotic Pre-Mustachian Motoring Mishap
« Reply #9 on: April 21, 2014, 11:14:25 AM »
Thanks for the advice everyone! I will be re-financing and paying it off ASAP and keeping it until it falls apart.