Author Topic: Stuck in a new car but...  (Read 4019 times)

JoshJ81

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Stuck in a new car but...
« on: November 13, 2014, 05:34:47 AM »
Hi, I'm Josh, new to MMM and I'm looking to make a strong push to badassity.  But first I need help (advice rather) on getting some current things cleared up before I can push on...or do I?

I made a horrible choice to get rid of my very fuel efficient low monthly cost car for a big dumb/gas hog/high insurance truck.  The truck was not even comfortable to drive...this all lead to me trading the truck (only owned it for 2 months) for another new car...I even paid the $5000 down payment on my CC...WTF right?  One after another, mistakes.  The good?  The car I chose, was even more fuel efficient than the car from before and certainly more than the truck.  As well, I got my insurance and car payment back to pre-truck status and it's like driving in a pillow (comfortable, not fragile).  I managed to pay off my CC debt within 2.5 months, still $0 balance for over a year now.  My monthly payment is $451 with $24K left.  However, I did some research and calculations to understand just how much of my $451 payment is actually going towards the principal.  Needless to say, it was sickening.  So, I did more calculations and decided that I wanted a minimum of $500 to actually go to the principal.  That number come out to about $589 (give or take a few dollars)...so I rounded it up to $600 to make it easier and a little more goes to helping the desired outcome.

I only have normal monthly bills, no other debt (CCs or other loans), and I'd like to get rid of this car payment so I can comfortably start back to 33%, 66% to 75% savings.  Basically, the car is all that is left, so is the above plan good enough, too much or is there a better way to get this car payment taken care off?  I don't think getting rid of it will help nor could I sale it for what I owe (although I haven't tried but pretty sure I couldn't) nor do I want to get rid of it because of the great fuel mileage and it still has low mileage on it's life.  Thanks for reading and I look forward to any advice.

JJ

myDogIsFI

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Re: Stuck in a new car but...
« Reply #1 on: November 13, 2014, 09:20:33 AM »
I think the best thing to do would be to sell the car and replace it with a sub $10k car, even if you have to take a loss on the new car.  Pay cash and drop comprehensive coverage from your insurance.

But I can see how that would be tough to do since you've been bouncing around between vehicles.  You're probably not screwing yourself too bad if you pay down the loan aggressively and focus on other stuff, e.g., not driving the car very much, while keeping an eye on selling the car when you're emotionally ready for it.

skunkfunk

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Re: Stuck in a new car but...
« Reply #2 on: November 13, 2014, 09:23:36 AM »
I don't think getting rid of it will help nor could I sale it for what I owe

Pretty sure you're wrong about the first part of that statement. Ditch it, pay the balance, get a cheap car and a bicycle + some other cheap motorized thing (e-bike or cheap motorcycle or something.)

You'll save on interest, depreciation, gas, and insurance. You're fooling yourself if you think a $500 car payment makes any damn sense. There is a huge potential for depreciation, and having to carry full coverage you might as well be lighting that money on fire.

4alpacas

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Re: Stuck in a new car but...
« Reply #3 on: November 13, 2014, 10:10:08 AM »
I don't think getting rid of it will help nor could I sale it for what I owe

Pretty sure you're wrong about the first part of that statement. Ditch it, pay the balance, get a cheap car and a bicycle + some other cheap motorized thing (e-bike or cheap motorcycle or something.)

You'll save on interest, depreciation, gas, and insurance. You're fooling yourself if you think a $500 car payment makes any damn sense. There is a huge potential for depreciation, and having to carry full coverage you might as well be lighting that money on fire.
+1

Remember that you still owe $24k.  Also, consider the higher insurance costs for the life of the car.

Forcus

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Re: Stuck in a new car but...
« Reply #4 on: November 13, 2014, 10:22:52 AM »
What is this car (make / model / year)?

Generally I agree that a sub $10k car is a better move, but there are some instances where the math could pencil out with very low depreciation on a more expensive, exceptionally fuel efficient car. Not saying it would, just noting that.

JoshJ81

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Re: Stuck in a new car but...
« Reply #5 on: November 13, 2014, 09:46:58 PM »
What is this car (make / model / year)?

Generally I agree that a sub $10k car is a better move, but there are some instances where the math could pencil out with very low depreciation on a more expensive, exceptionally fuel efficient car. Not saying it would, just noting that.

2013 VW Golf TDI, all scheduled maintenance is free up to the first 50000 miles, it gives 500ish miles per tank/42 mpg.  I've had it for a little over a year and 4 months, it has just hit 15.5K miles and I tend to stay under the 12k a year in any car.

I fully agree that paying $500 a month is stupid...but so far this car is very reliable and efficient and I was planning on keeping this car until it dies on me and hopefully that is well passed 200K miles.  My main goal is not have any loans or unnecessary debt when I retire from the military in less than 4 years.  The car payment is the last thing and scheduled to be paid off Aug 2018 if I pay the minimum.  I hate my rent but I didn't have too much to pick from at the time because I'm waiting for a position (in the military) to open up in Feb. 2015 that will be in a different state.  I'm hoping to buy a home when I get there but I'm not sure if that is good idea...but I know high rent is not smart either.

madmax

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Re: Stuck in a new car but...
« Reply #6 on: November 13, 2014, 11:17:23 PM »
I fully agree that paying $500 a month is stupid...but so far this car is very reliable and efficient and I was planning on keeping this car until it dies on me and hopefully that is well passed 200K miles.

You can sell the car even if you are upside down on the loan. You can

1) Get a personal loan from a credit union to pay the dealership and sell the car.
2) You can go to Carmax and sell the car to them and pay the difference

Mathematically, selling the car makes the most sense. However, if you really want to keep the car, throw everything you have at the loan >>$500 until you've paid it off. As for reliability, VWs are not known for reliability so be prepared for some big ticket maintenance down the line after 50K.

boarder42

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Re: Stuck in a new car but...
« Reply #7 on: November 14, 2014, 06:02:01 AM »
You came here for what looks like support in your decisions. You aren't going to find it. Sell the car. Its a waste of your money.  Do you want advice or just a pat on the back. All you will get here is face punches 24k for a go kart basically you have to be kidding me

JoshJ81

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Re: Stuck in a new car but...
« Reply #8 on: November 14, 2014, 06:21:11 AM »
You came here for what looks like support in your decisions. You aren't going to find it. Sell the car. Its a waste of your money.  Do you want advice or just a pat on the back. All you will get here is face punches 24k for a go kart basically you have to be kidding me

HAHA!  I doesn't feel like I'm being punched and I wasn't looking for the support you may feel I asked about.  All the advice I have read here is good enough for me and nothing to argue from my side.  Just because I gave an insight to what I think or the reason to do what I have done, doesn't mean I'm not open to hearing other peoples ideas or changing my process.  So, put down your dukes there killer, I agree it is a waste.  But what I'm looking for is ideas, sale it or keep throwing a large amount to pay it off faster or something else?

The point to sale to Carmax then take a loan to pay the remainder...interesting but doesn't that defeat the purpose?  Or am I looking at that statement wrong?

madmax

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Re: Stuck in a new car but...
« Reply #9 on: November 14, 2014, 08:40:11 AM »
The point to sale to Carmax then take a loan to pay the remainder...interesting but doesn't that defeat the purpose?  Or am I looking at that statement wrong?

Carmax is an extreme example and will buy the car for retail, you should really only sell to a private party to get the most out of the loan. But it is still better than keeping the car and paying down the loan.

Let's say you bought the car for $20K with $5K down. You have $15K remaining on the loan. You can sell the car for $13K and get a $4K loan. You are now only $4K in debt and have gotten rid of a 13K depreciating asset. Get a 2K beater to drive and you can probably sell the beater for that much in a couple of years if you want. You will also save money on insurance.