Author Topic: To sell the car or not to sell the car?  (Read 839 times)

Rhubbard

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To sell the car or not to sell the car?
« on: February 05, 2019, 02:32:46 PM »
To sell the car or not to sell the car?

(I am a fool and have made vain mistakes!)

Total household income is $190k. Most comes from husband (engineer) but some mine (elementary teacher.) Monthly take home is $9000 + husband gets ridiculous tech stock payouts and bonuses and such.

I had a paid off 2007 Passat wagon that I LOVED but sold in 2017 because it needed $4,000 repairs twice a year and I wanted something with a 3rd row. Bought a brand new Hyundai Santa Fe Limited for $38,000 but it fell victim to dangerous transmission problems. NHTSA inundated with complaints and class action lawsuit is pending - no joke! After 9 months of owning it (and 12 multiday repair shop trips on the brand new vehicle), we cut our losses and ďupgraded.Ē

Got a certified preowned 2018 Audi Q5. Paid about the same as the Hyundai. I love the car, itís literal perfection on wheels, no complaints and it super safe, response, fun to drive, sexy, etc.

Iíve known about Dave and MMM for years but am only just getting serious about it. This much income is new to us - family of 4 on 45-90k is where we have spent most our time. Frankly, I ignored my debt because I didnít feel like I could tackle it so why bother.

So, here we are 9 months later, with a car I love but kind of want to sell and get something with more room (for a dog, kidsí friends - both our kiddos are school aged and active in scouting and sports, and family camping trips as we live in the pacnw and camping is life). Iím thinking I get over myself and suck it up and get a 5ish year old Sienna with AWD (our hills make this a must).

Husband about had a coronary when I brought it up; I think mostly heís sick to death of talking about cars and car transactions after what we went though with the Hyundai. Car shopping 3 times in 3 years IS awful so I donít fault him.

Our other vehicle is a paid off 09 VW GTI (which now has many dents because the Santa Fe was way too wide for our kids to handle in the garage - sliding doors would be helpful.)

Debt is down to $62k in student loans (from $100k - all mine from my masters). Other than that we just have the house (again, this is a newish situation for us. Most of our 14 year marriage has had credit card debt).

In June, we anticipate a ~$30-35k payout of stock/bonuses. We are in disagreement for how to budget this.

Husband wants to pay off the Audi (current balance $32k @ 4.9%) and put the extra $585 a month to student loan (in addition to my entire salary.) I believe his reasons are: we like the car, we can afford it, itís very nice, we deserve it after years of scraping by etc.

I want to sell it for a modest amount of equity ($7k what we put down), save 2-3 months of my salary up and get a $15kish Sienna in cash.

If we canít reach an agreement on my idea, then my second preference would be to still put the $35k to my student loan (7.9%) due to the interest and emotional baggage.

Iíve carried my student loans since 2007 - I was completely unable to get hired full time due to the recession and budget cuts. I worked part time as much as I could for 4 years then stayed home when we had children for 5 years. Iíve been back in the full time work force for 1 year and 11 months now. I donít qualify for income based repayments or public service loan forgiveness unless I want to restart the clock to 0 and make 10 more years of payments (nope!) The minimum is $600. Weíve paid $38k in the last two years but couldíve paid more...

My oldest is 8 and I want to start working on their college funds and quit paying for mine already!

What should we do??

Iím 36, husband 37. I have PERS and he has a 401k but I have no idea how much is in it other than not enough! House is worth $475k but our mortgage is $299k @ 4.9% 27 years to go.

Syonyk

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Re: To sell the car or not to sell the car?
« Reply #1 on: February 05, 2019, 02:56:21 PM »
Husband wants to pay off the Audi (current balance $32k @ 4.9%) and put the extra $585 a month to student loan (in addition to my entire salary.) I believe his reasons are: we like the car, we can afford it, itís very nice, we deserve it after years of scraping by etc.

"Scraping by" on $90k?  Mmhmm.

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If we canít reach an agreement on my idea, then my second preference would be to still put the $35k to my student loan (7.9%) due to the interest and emotional baggage.

7.9%?  Wow.  Yeah.  Attack that.

======

Honestly, you have way more problems than just the car.  The case study forum might be a better place.

At ~$200k/yr, I'm going to suggest that swapping vehicles around is probably not the right answer.  Yes, you save a bit on a vehicle, but you also suffer the depreciation and transaction costs of swapping vehicles, which are often substantial.  If you do swap for the Sienna, then stop buying cars.  You're going through cars like some people go through toilet paper, and that's expensive.

If your Audi isn't doing what you want, then there's nothing wrong with selling it and getting a different car, but you have way more issues to address than the car.  You've got massive income, but it seems like oddly massive piles of debt at... really, rather gross interest rates.  4.9% on a mortgage is high enough that you should either refinance it or pay it off (it's the same as your car loan), IMO, 8% on student loans is weirdly high... etc.

Figure out how to get your monthly expenses down by a large margin, pay stuff off, and you solve an awful lot of problems.

RWD

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Re: To sell the car or not to sell the car?
« Reply #2 on: February 05, 2019, 03:41:02 PM »
The cost of ownership of an Audi Q5 should not be a big deal on that income. You should easily be able to pay off both the student loans and the car loan in 8 months. If this seems crazy to you then you need to figure out where else you are hemorrhaging money (because it's not on cars).

You need to work with your husband as a team on your finances.

Syonyk

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Re: To sell the car or not to sell the car?
« Reply #3 on: February 05, 2019, 04:06:32 PM »
If this seems crazy to you then you need to figure out where else you are hemorrhaging money (because it's not on cars).

Yeah, a case study would really be better here - there are problems if cars are the focus at that income level (they don't own a particularly expensive house).

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You need to work with your husband as a team on your finances.

Also, quite true.  You can't have wildly diverging goals on finances and get anywhere, and it sounds like the OP and her husband do.

Rhubbard

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Re: To sell the car or not to sell the car?
« Reply #4 on: February 05, 2019, 04:32:39 PM »
Sorry if this is in the wrong spot, Iím new to the forums.

Scraping by was years on 25k not the 90k :) I grew up in actual poverty and we have worked hard  together to get out of it - that is more what I was referring to than the 90k.

We are in sync on all issues except this one. I was just wondering what the experts on personal finance would say to settle the debate in my home.

Thank you for the advice :)

Husband wants to pay off the Audi (current balance $32k @ 4.9%) and put the extra $585 a month to student loan (in addition to my entire salary.) I believe his reasons are: we like the car, we can afford it, itís very nice, we deserve it after years of scraping by etc.

"Scraping by" on $90k?  Mmhmm.

Quote
If we canít reach an agreement on my idea, then my second preference would be to still put the $35k to my student loan (7.9%) due to the interest and emotional baggage.

7.9%?  Wow.  Yeah.  Attack that.

======

Honestly, you have way more problems than just the car.  The case study forum might be a better place.

At ~$200k/yr, I'm going to suggest that swapping vehicles around is probably not the right answer.  Yes, you save a bit on a vehicle, but you also suffer the depreciation and transaction costs of swapping vehicles, which are often substantial.  If you do swap for the Sienna, then stop buying cars.  You're going through cars like some people go through toilet paper, and that's expensive.

If your Audi isn't doing what you want, then there's nothing wrong with selling it and getting a different car, but you have way more issues to address than the car.  You've got massive income, but it seems like oddly massive piles of debt at... really, rather gross interest rates.  4.9% on a mortgage is high enough that you should either refinance it or pay it off (it's the same as your car loan), IMO, 8% on student loans is weirdly high... etc.

Figure out how to get your monthly expenses down by a large margin, pay stuff off, and you solve an awful lot of problems.

Syonyk

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Re: To sell the car or not to sell the car?
« Reply #5 on: February 05, 2019, 04:34:58 PM »
The "Case Study" forum is more for, "Here's our monthly income/expenses/debt, what can we change?" type advice.

Which, if you're still hauling that debt around, might be helpful.

I mean, you should have $2k-$5k free income a month to throw at debt, if you're living like you're at $90k and making nearly $200k.

Rhubbard

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Re: To sell the car or not to sell the car?
« Reply #6 on: February 05, 2019, 04:48:38 PM »
Thank you again for the advice.

I do have a question about the mortgage rate seeming ďweirdly highĒ - we just bought 3 years ago, have 820 credit scores and put 20% down. This was the best rate available at the time. What would be a better rate to look for and where? We have a rocket mortgage.

And my student loan rate IS gross but I graduated in May of 2007 with a mix of private grad school loans and subsidized loans. I consolidate that summer and have been stuck with an awful rate ever since. I did look into refinancing but I kind of just want to attack it and kill it.

Good point about stop buying cars! I think I need to just calm down.

And the money ďhemorrhageĒ was identified - we really only achieved this income a year and a half ago. Spent $$$ on some deferred home maintenance items that needed tending to and took an awesome vacation we donít regret. This plus eating out way too much was the hemmorrage. We are now back on the budget living off $60k/ year and the rest is going to the debts. Debt freedom should hopefully be within a year and I am thrilled for that (if I can stop freaking out about my car.)

RWD

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Re: To sell the car or not to sell the car?
« Reply #7 on: February 05, 2019, 04:54:10 PM »
You may also be interested in the Investment Order post. May help you order your priorities (especially if you've been tainted by Dave Ramsey's philosophy). But first savings to invest.

We (2 person family) saved over $100k last year despite buying a Porsche. Your income is ~19% higher than ours. I would think your family of 4 and an Audi could manage similar numbers. Sounds like you should be on track with a $60k/year budget.

On the mortgage rate... We bought our house 3 years ago as well and our rate is 3.125% (15 year fixed). The 30 year option was 3.875% at that time. 4.9% isn't crazy but does seem high for perfect credit and 20% down. Did you shop around for a rate? Unfortunately rates have gone up since then so you probably won't have much luck refinancing now. Personally I would invest before paying extra on a 4.9% loan.

Rhubbard

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Re: To sell the car or not to sell the car?
« Reply #8 on: February 05, 2019, 04:56:43 PM »
Whoops my bad - got my numbers mixed up. Mortgage is 3.25% 30 year fixed.

Syonyk

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Re: To sell the car or not to sell the car?
« Reply #9 on: February 05, 2019, 04:57:32 PM »
I do have a question about the mortgage rate seeming ďweirdly highĒ - we just bought 3 years ago, have 820 credit scores and put 20% down. This was the best rate available at the time. What would be a better rate to look for and where? We have a rocket mortgage.

In 2015, rates were in the 3.5%-4% range - how did you manage 5%?  That's a rather substantial jump over the typical rates of both that time and now.

//EDIT: Ok, 3.25% on a 30 year fixed is a good rate.  I remove my objections to your mortgage rate.  That's a good rate, keep it.

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And my student loan rate IS gross but I graduated in May of 2007 with a mix of private grad school loans and subsidized loans. I consolidate that summer and have been stuck with an awful rate ever since. I did look into refinancing but I kind of just want to attack it and kill it.

Attacking and killing it is good, but you've paid over $50k in interest on that loan in the past decade, minimum ($62k * 7.9% * 10 = ~$49k) - at this point, yes, kill it, but that's not been helping you out.

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And the money ďhemorrhageĒ was identified - we really only achieved this income a year and a half ago. Spent $$$ on some deferred home maintenance items that needed tending to and took an awesome vacation we donít regret. This plus eating out way too much was the hemmorrage. We are now back on the budget living off $60k/ year and the rest is going to the debts. Debt freedom should hopefully be within a year and I am thrilled for that (if I can stop freaking out about my car.)

At this point, I'd strongly suggest just keeping the car you have and paying debt off.  Then worry about optimizing it.  There's lower hanging fruit right now.

Rhubbard

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Re: To sell the car or not to sell the car?
« Reply #10 on: February 05, 2019, 05:03:26 PM »
At this point, I'd strongly suggest just keeping the car you have and paying debt off.  Then worry about optimizing it.  There's lower hanging fruit right now.


Okay, thank you! I really do feel more secure in this having asked an outside person.

So the. My question is; which do I go for first with the upcoming $30k? Student loan or car? My gut says loan (interest! Horrible emotional baggage!) but husband wants to do debt snowball and knock out the Audi payment. I know itís not going to make a super big difference in the long run, but ?

(The student loan interest makes me SICK. It was over $90k at one point. We have paid quite a bit last year. Not as much as we couldíve but Iím ready to focus on it and be disciplined now.)

RWD

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Re: To sell the car or not to sell the car?
« Reply #11 on: February 05, 2019, 08:45:33 PM »
So the. My question is; which do I go for first with the upcoming $30k? Student loan or car? My gut says loan (interest! Horrible emotional baggage!) but husband wants to do debt snowball and knock out the Audi payment. I know itís not going to make a super big difference in the long run, but ?
Absolutely the student loan, no question. $30k towards 7.9% is $900/year better than towards 4.9%, before even factoring in compounding. Debt snowball is stupid. Follow debt avalanche instead. If you want to compare the two methods check out the unbury.us calculator. But it's just silly to follow a psychological trick to help you pay down your debt when you've got six figures per year to throw at it. It's designed for people living pay check to paycheck with cash flow problems. You're nuking it at light speed anyway, why pay hundreds of extra bucks in the process if you don't have to?

The sooner you stop following Dave Ramsey the better. Every single thing he teaches is purposefully sub-optimal. Some of it is even designed to line his own pockets (e.g. investment recommendations with kickbacks).

Syonyk

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Re: To sell the car or not to sell the car?
« Reply #12 on: February 06, 2019, 04:20:35 PM »
The sooner you stop following Dave Ramsey the better. Every single thing he teaches is purposefully sub-optimal. Some of it is even designed to line his own pockets (e.g. investment recommendations with kickbacks).

From the perspective of this forum, I agree, but not everyone is at the advanced finances point, and Dave Ramsey is one hell of a motivator - far more so than some of the other financial courses out there (I'm facilitating a Crown session, and while the material is better, it doesn't quite have the Ramsey Light-a-Fire aspect to it).

His long term investment advice is a bit suspect, and I've got a problem with "Live like nobody else now so later you can buy that Mercedes SUV!" thing he has going is annoying, but in terms of people actually getting motivated and getting steps to get out of debt, he's solid.

A mathematically suboptimal strategy, that's better for your brain, is more likely to be adhered to than "Good news, you get to slog through $70k in debt while paying minimums on the $1000 credit card!" - and the results prove it.

For this particular case, yes, the torrents of cashflow that should be available mean it's less likely to matter one way or the other, but the last 10 years of carrying student loan interest would have been well served by a Ramsey-kick.