Honestly I drive so little I almost consider selling my own car but I am not sure if it is feasible. I fly for work primarily so it would mean taking a cab to the airport instead of driving my own car. I would probably have to pay out of pocket for the difference which may be around $30-$40 a week. Currently I am reimbursed .555 a mile which round trip totals $11.10 and pay $28 for a 4 days airport parking. A cab round trip would be about $80. So about a $40 difference. My car is the more expensive of the two but it has financed service for oil change, tire rotation etc and it has a full 100k mile warranty on all non-wear items. I would love to lower this monthly payment but I am unsure of how to do so outside of selling my car and buying a cheaper one. Note when we go on road trips I always drive as my car gets 35-40 MPG. My SO would not consider selling her car as she loves it, it is only probably worth $10k anyways so it would probably be a net negative for her to consider something else.
It sounds like you're out of town for work most weeks. Is that accurate? I'll assume it is for the sake of this post. Consider whether you need two cars at all. Your car is already sitting at the airport doing nothing (besides costing your company $7/day) four days per week. What about the weekends? Do you really need two cars then? How often do you and your wife need to be in different places at the same time over the weekend? It's pretty rare for me and my wife, so it's not a problem for us to share a car. In the event where we're both out of the house doing different things, one of us is always able to figure out a way to use transit or walk or get a ride from a friend.
Let's suppose you get rid of the car and don't buy a cheaper one to replace it. You'll need to get to and from the airport every week (4x monthly). You say a taxi ride would cost you $40 extra, or $160/month. When you take road trips you'll be using your wife's car which is not as fuel-efficient, so there's a little extra fuel cost there. How much would this be? I'll assume $40/month on average to make the numbers come out to a nice even $200 in extra expenses monthly.
But what would you save? I think it would be a lot more. Your car payment would be gone. That's about $400/month. Your insurance would be gone. That's another $50/month. You would no longer need to buy gas for the car - another $50/month? That's $500 cut out of your current budget by jettisoning a vehicle.
Even though your airport trips would be more expensive as a one-car family, you're still probably coming out at least $300/month ahead by getting rid of it. Could your wife ever drop you off at the airport or pick you up on the way back? Is there a decent public transit option for this trip? Every time you skip the taxi you save even more!
You might read through this all and think you still might need two cars for some reason or another. I urge you to sell the car and try life without it for a month. See how your airport trips work out, and see how often having only one car on the weekends becomes a hassle. If you decide after a month that you want a second car after all, get a cheap, fuel-efficient used car. Whatever you do, don't take out another car loan! You'll probably be able to get cheaper insurance by going to a liability-only policy, and the lack of the car payment will mean an extra $400/month in your pocket.
1. My only concern about using the e-fund to pay off the cars is that if one of us lost a job we would be in bad shape.
Actually I think you would be all right. Suppose you got rid of your car loans and had to dip into the emergency fund to do it. With those loans gone, your monthly expenses are now $600 lower. Your monthly plus non-monthly expenses would now average $2,736/month (down from $3,336/month). I'm ignoring your $800 of "clothes, dinners, drinking, events, saving for vacation," because these could all easily be eliminated for a while if you lost your job, right?
Your wife is the lower earner, but her after-tax paycheck plus 401(k) contributions adds up to $2,705/month, just $31 lower than your recurring expenses! So if you lost your job and your wife temporarily paused her 401(k) contributions until you found a new one, you would just need to find $31 to cut out of your recurring expenses to make things work, even without an emergency fund!
Isn't it amazing how much flexibility the lack of a car loan can buy you?
2. We bought this house brand new and from what I have read losing your "new home" termite warranty can drop the value of your home by 5%. This may be just bullshit that is spread to keep people renewing so I will look into it further. I would love to drop this if possible.
I really think this is a bunch of FUD that they throw at you to keep you paying for unnecessary coverage. It's not a huge amount of money in the grand scheme of things, but you should still probably cancel it.
You're doing pretty well overall, especially considering your ages. Here are three things I recommend doing this year to put yourself on an even better path:
1) Get rid of the non-mortgage loans. Sell your car and use the proceeds (plus your emergency fund) to pay off your wife's car loan and student loan.
2) Increase your 401(k) contributions. Between the amount you already contribute and your "leftover" $1,537/month, you should both be able to max out your 401(k)s, or at least get very close.
3) Start accelerating your mortgage payments in order to get rid of PMI. Take the money you're no longer spending every month on car loans, plus the extra money you're saving on your taxes because of your higher 401(k) contributions, plus any other money you can cut out of your budget ($800 for discretionary spending is a bit high) to make this happen.