Author Topic: What to do with car  (Read 1877 times)

sprayed

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What to do with car
« on: March 05, 2017, 05:16:58 AM »
First time poster here so please be gentle.  I recently purchased a 2017 Honda Hybrid Touring.  I owe $41000 and the car is probably worth around $30000. I am able to put roughly $2000 to it a month.  Interest is only 2.5% a month.  What should I do?  Pay off the car entirely and keep it, which will take roughly 2 years.  Or pay down to what it is worth and sell it and then buy a used efficient car?    This will take 5 months but I don't have cash to buy a used car and would need to finance it (Or save and figure out how to get to work). 

We don't have credit debt, but we do have 2 car loans (wife's a lease), student loans ($30000 total), mortgage ($290k), and a home equity line of credit ($60k).  We make decent money ($170k combined) and I want to make getting rid of my car payment my first step on to early retirement.  We are putting the minimum amount in our 401ks to get company match.   

I have a good idea what to do once I take car of my car situation.  I'm just not sure the best financial solution.

ShoulderThingThatGoesUp

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Re: What to do with car
« Reply #1 on: March 05, 2017, 06:02:05 AM »
Post a full case study; it doesn't sound like the car is your biggest problem.

Hargrove

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Re: What to do with car
« Reply #2 on: March 05, 2017, 06:41:08 AM »
Woo, that's a lot of car in depreciation free-fall.

You have decent cash flow if you can put 2k a month into the car. What do you mean you would have to finance a used car? The financing got you into this mess - it would only take a few months to save for a used car. Save before you sell this one.

Look at it this way:

Used car: 21k (difference in depreciation and interest +10k for used car)
Current car: 41k + interest

You're going to pay one of these numbers. You could buy a reliable used car in that window twice. I feel for you - it would totally suck to eat 10k worth of mistake, but you're either going to eat it by working for it for two years to pay twice the mistake, or by working on it for 5-8 months.

How much do you drive? At least you bought a 48mpg car. Even an efficient non-hybrid is not likely to break 40. It's going to save ballpark $250 a year for every 10k miles if gas is 2.49/gal vs a 32 mpg car, but unfortunately, that doesn't hold a candle to its depreciation.

http://www.nadaguides.com/Cars/2017/Honda/Accord-Hybrid/Touring-Sedan/Cost-to-Own
or go down to "other styles" here:
https://www.kbb.com/honda/accord-hybrid/2017/base-style-ownershipcosts/