Car buying question

[Kansas Terri]

I am handicapped and live in a semi-rural area. So I need my car. But, my car has 220,000 miles on it, and I was considering buying a car in about 1 years time.

I have $9,000 on a zero interest credit card, and the 0% part is about to expire. I have about $4,000 in a savings account. And, last year I inherited about $30,000 that I really do not want to spend.

Basically, I had intended to pay off the 0% interest credit card before they started charging interest on it but because of $9000 unexpected costs I only managed to pay off $1000 of it.

So, assets are $27,000 (I invested a bit of the inheritance), $4000 savings, and a car that is showing signs of wearing out.

Debits are the $9000 on the 0% interest card that either needs to go into another 0% balance transfer or be paid off.

I have a choice to make: pay down the debt over the next year or sock away money for a gently used car. I do not think we can do both at the same time.

What would you folks do?

[JLee]

What signs of wear are you referring to?  Many cars will happily run past 220k.

[Kansas Terri]

It needs servicing a couple of times a year. It has not needed anything expensive since perhaps 2 years ago, but it needs work more often.

Also we need to put freon in the air conditioner twice a summer. For me air conditioning is not a small thing, as heat makes me ill.

[RWD]

I'm a little confused, it sounds like you have enough cash on hand ($31k) already to pay off the debt ($9k), buy a gently used car ($5-10k), and still have a healthy emergency/savings fund leftover.

Also we need to put freon in the air conditioner twice a summer. For me air conditioning is not a small thing, as heat makes me ill.

This means you have a freon leak that needs to be fixed. Having to repeatedly add freon is not a proper/permanent fix for any air conditioning problem and is probably bad for the environment.

[plog]

And, last year I inherited about $30,000 that I really do not want to spend.

Money is fungible--its just a tool.  In the sense that I realize that humanity is irrational, I "understand" how you feel that 30k is special.  It is not. 

If you've spent 9k with your left hand and your right hand is holding 30k, your total net worth is 21K no matter what mental gymnastics you do when you look at your right hand.  Not to get all Dave Ramsey on you, but if you pay off that 9K and then in 3 months feel like being in debt again, you will be more than able to. 

Think long term and rationally and not short term and irrationally.  Pay off your debt and get secure in your transportation.

[Kapiira]

Is your inheritance accessible or is it in a retirement account with penalties for withdrawls? 

Either way, I would keep driving your car until it needs a major repair.  With the rest, it depends on how accessible the inheritance money is.  If the money is accessible, I would use the $4,000 to pay down the credit card bill, then transfer the rest to another 0 transfer fee, 0% card and then pay it off as quickly as you can.  If your car dies you can use the inheritance money to buy a new one, and then pay yourself back.  If your car doesn't die, you can save up for the new car and buy when you've saved enough.

If your money is not accessible, I would transfer the balance and save up money.  If the car dies then you replace it.  If the car doesn't die, save until you have enough for the car and then start paying down the credit card.

[Kansas Terri]

Ah HA!

Interest has been insignificant for so many years that I had not thought to take it into account. If I leave the $27,000 where it is, at the end of a year I will have earned just over $200 in interest.

If I renew the 0% interest credit card it will cost me $180 assuming a 2% transfer fee. Which is what the banks are offering. So, if I leave the money in the bank where it is and simply do another 0% balance transfer I will be $20 ahead.   

And, because I would be paying no interest on the credit card, then I can put money in the bank every month while making the minimum payment.

If the car dies I can replace it with the money I will be putting in the bank over the next year. *IF* the car does NOT die then I can pay off the credit card with the money in the bank, and if the car DOES die I will buy another car instead and start banking money again to pay down the 0% interest credit card.

As for doing both paying off the credit card AND buying the car, when I was younger a $10,000 savings account would have been a healthy amount. But, now, I can no longer work and if my husband looses his job then I will have no insurance to cover my rather high medical costs. So for me, $10,000 for an emergency fund  is not a great deal of money. Not any longer. My medicine, without insurance, would be $5000 per month.

[JLee]

Ah HA!

Interest has been insignificant for so many years that I had not thought to take it into account. If I leave the $27,000 where it is, at the end of a year I will have earned just over $200 in interest.

If I renew the 0% interest credit card it will cost me $180 assuming a 2% transfer fee. Which is what the banks are offering. So, if I leave the money in the bank where it is and simply do another 0% balance transfer I will be $20 ahead.   

And, because I would be paying no interest on the credit card, then I can put money in the bank every month while making the minimum payment.

If the car dies I can replace it with the money I will be putting in the bank over the next year. *IF* the car does NOT die then I can pay off the credit card with the money in the bank, and if the car DOES die I will buy another car instead and start banking money again to pay down the 0% interest credit card.

As for doing both paying off the credit card AND buying the car, when I was younger a $10,000 savings account would have been a healthy amount. But, now, I can no longer work and if my husband looses his job then I will have no insurance to cover my rather high medical costs. So for me, $10,000 for an emergency fund  is not a great deal of money. Not any longer. My medicine, without insurance, would be $5000 per month.

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