Author Topic: To sell or not to sell.... $17K dilemma  (Read 3408 times)

ATLien_Si

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To sell or not to sell.... $17K dilemma
« on: December 31, 2016, 01:08:36 AM »
I currently have a 2012 Acura sedan with 68k miles, that I owe $17,000 on. I'm trying to decide whether I should sell it, or pay it off and drive it for the next 10+ years (hopefully). With my current job I have a company vehicle, so I really don't NEED the car at the moment. But Im also looking for a new job, so I may need a car in the near future. Considering selling my current car (likely at a loss of $1-2K so I'll have to pay that to get out of it) and buying a Toyota or Honda sedan for around $4,000. My GF just moved about 3.5 hours away so I'll need something to drive back and forth at least one weekend out the month.

Here are the numbers:

Net Monthly Income: $2700

Expenses:
$500 - Rent
$160 - Utilities (Electric, Cable, Internet) - I have 2 roommates so this isn't too bad.
$260 - Student Loans ($23,000 @ 4.5%) - I want to pay this off ASAP
$500 - Car payment ($17,000 @ 1.79%)
$110 - Car Insurance - This would go down with a cheaper car
$500 - Groceries - WHOA! this is out of hand. This includes eating out and buying alcohol and non sense.
$100 - Gas - Driving 3.5 hours once a month, other than that I rarely drive. with a new job it would increase.
$0 - cellphone bill - my company says for my phone, but this would change with a new job
$50 - Subscriptions (Apple Music, Gym)
Total: $2180

Assets:
$2500 - Savings
$1100 - Investment account - I would like to build this up
$11,000 - 401K - I contribute what they match

I'm currently 26. My goal is to pay off debt, grow my stash, and start REI. I don't quite have enough saved to sell my car, pay the difference Im under water in it, and buy another car cash. I don't want to get out of one car loan just to get into another, even if I can pay it off in a year. Just writing this, I realize I have to change my habits lol. For the new year I plan to cook at home more and drink less.

So what advice do the Mustachians have for me?

somers515

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Re: To sell or not to sell.... $17K dilemma
« Reply #1 on: December 31, 2016, 04:29:08 AM »
Hi ATLien,

First off let's start with the positives.  You are 26 and on this website and you are thinking thoughtfully about your finances - great start!  Having roommates has provided you with what appears to be a really reasonable living arrangements.  With a net take home pay of 32k you are still currently saving about $500 a month.  All good stuff.

I gather you already appreciate this but holy smokes man - $17,000 still owed on your car.  Take home of $2700 and you spend $500 every month on a car payment?!  Wow.  Others who have had car loans over the course of their lives might be able to advise you better on how best to escape.  Please do whatever you can to avoid buying a car with a car loan.  Save up until you have enough to buy a car outright and then get out of that car loan you are currently in.  Your next car might not be as "nice" and it surely will be used but it will be a car you can actually afford.

http://www.mrmoneymustache.com/2011/05/02/car-strategies-to-cut-your-costs-in-four-or-more/
http://www.mrmoneymustache.com/2011/11/28/new-cars-and-auto-financing-stupid-or-sensible/

I agree with you that your food budget is also a little out of control.  I assume you are eating and/or drinking out a lot.  I did too when I was 26, but $500 still sounds high for one person.  Do what you can there to rein that in a little.  Perhaps just the act of tracking each month what you spend will help you.  If you aren't already a good cook, learn - as an added bonus I'm sure your GF will appreciate it.

http://www.mrmoneymustache.com/2012/03/29/killing-your-1000-grocery-bill/

Others may tell you differently but I'd like to see your cash savings higher and up to at the very least 3 months spend, so for you around 6k at least.  I'm also not sure why you have an investment account separate from your 401k unless you are saving for something other than retirement or the options at your 401k are really bad.  I'm glad you are at least contributing to get the match (no other investment will give you essentially a guaranteed 100% return!) but once you have your car situation straightened out and a decent savings amount I would then invest even more into your 401k, getting as close as I could to the 18k annual limit before considering other taxable investments.

http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/

Then its all about getting a nice savings rate, work on maximizing your income while keeping your spending under control.  Hope you found this response helpful.  Good luck!

bigalsmith101

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Re: To sell or not to sell.... $17K dilemma
« Reply #2 on: January 01, 2017, 03:53:43 PM »
This is not a dilemma, this is a pants of fire emergency. SELL YOUR CAR.

Even if you take a $2k loss when paying off your car loan, you'll be coming out ahead. You're paying $610/mo for your car/insurance. That's insane, and represents, 22.6% of your net take home pay. HOLY SHIT.

If we take the scenario that you provided and you sell your car, and buy a $4k Honda or Toyota you're coming out way ahead.

You can vastly decrease the timeline to achieving this scenario by dropping your food budget in half, easily saving $250/mo, bringing you to a monthly savings rate of $770! That change alone with move your savings rate from 19.25% to 28.5%, increasing your savings rate by nearly 50% over it's current position! HELL YES.

Now, fast forward 5 months, and you have a lower balance owed on your car, and have over $6k in savings. It's time to hit the used car market! You sell your car, buy the super cheap and efficient Japanese car, and you're saving ANOTHER $500/mo! Fuck yea!

Now you'll have the opportunity to save $1270/mo, thus MASSIVELY increasing your savings rate from 28.5% to 47%. That is a very impressive savings rate when you're on a rather low income such as you are. That's something to be PROUD of!.

So, to recap, you spend a reasonable amount of money on food at $250/mo for only 5 months, and you'll have enough cash to pay for that used car in full, as well as to sell your Acura and get out from under your loan. At the same time, you'll be increasing your savings rate from 19.25% to 47%, and seriously jumpstarting your way towards financial independence. 

Using a basic compound interest calculator, you can see that if NOTHING changed in the next 24 years, even with your meager earnings, you're currently in a position to bring about a scenario where you could generate nearly $900k by the age of 50, doing very little. You've got massive opportunity amigo! You

Current Principal:   $   0
Annual Addition:   $   14400
Years to grow:       24
Interest Rate:        7%
Compound interest 1  time(s) annually
 
Future Value:   $896,386.14

ATLien_Si

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Re: To sell or not to sell.... $17K dilemma
« Reply #3 on: January 01, 2017, 07:28:27 PM »
yeah @bigalsmith101 I guess this isn't a dilemma.. can't have your cake and eat it too, and I would much rather have my cake lol...

@Somers515 I'm going to get this budget in check and sell this car by may/june.


somers515

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Re: To sell or not to sell.... $17K dilemma
« Reply #4 on: January 02, 2017, 05:40:03 AM »
Good luck ATLien!  Let us know how it turns out.

chasesfish

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Re: To sell or not to sell.... $17K dilemma
« Reply #5 on: January 02, 2017, 05:46:50 AM »
You need to sell the car immediately.  Getting rid of that debt and your student loan debt will be significant.

I'm assuming you live in Atlanta - That's a business car rental market, you can rent weekend vehicles dirt cheap.

If you consider changing jobs, remember that your car benefit is just part of your compensation.

MicroRN

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Re: To sell or not to sell.... $17K dilemma
« Reply #6 on: January 02, 2017, 07:44:31 AM »
yeah @bigalsmith101 I guess this isn't a dilemma.. can't have your cake and eat it too, and I would much rather have my cake lol...

@Somers515 I'm going to get this budget in check and sell this car by may/june.

Good for you!  Other than the car and the groceries, your budget isn't too bad.  Rent/utilities are certainly in line with your income.  I've had a lot of luck with older cars.  I had a 14 year old Honda Accord that was still running at 270,000 miles, a 10 year old Dodge Neon that I paid $1200 cash for and drove for 3 years with no repairs other than a new battery, and now have a 12 year old Honda Civic that's still going strong.  Get something in good mechanical condition - if you can drive stick shift you may be able to find a better deal - that gets good mileage.  If you pay cash, don't sweat if it might need some repairs, because you just freed up $500/mo.  I haven't had a car yet that averaged that much in repairs.

ShoulderThingThatGoesUp

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Re: To sell or not to sell.... $17K dilemma
« Reply #7 on: January 02, 2017, 11:23:54 AM »
Why wait until May to make a good decision?

ATLien_Si

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Re: To sell or not to sell.... $17K dilemma
« Reply #8 on: October 08, 2017, 07:11:10 PM »
Just an update (I know its been like 9 months). I finally sold the car after landing a job that provides a company vehicle that I can use for personal use as well. They even pay for gas!

chasesfish

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Re: To sell or not to sell.... $17K dilemma
« Reply #9 on: October 10, 2017, 04:27:37 AM »
Congrats on the choice and new job!

elaine amj

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Re: To sell or not to sell.... $17K dilemma
« Reply #10 on: October 11, 2017, 10:15:25 PM »
Congratulations!!! How is everything going on the groceries/eating out side?