Financial advice re: car

[shane_c]

Just looking for some advice from the CP Financial gurus out there.

A bit of background……

I have a 2004 Ford Focus that engine wise works fine, but it has an SPI engine which tends to drop a valve and screw up the engine around 200,000 km. I currently have 156,000 on it and given the amount of driving I do I expect to be up around 200,000 in another 1 – 1.5 years. Each of the last 2 years I’ve had to do about $2000 in repairs to the car. It’s due for an inspection in January and I don’t want to be hit with more repairs which it likely will need. I currently owe about $5000 on the Focus and figure if I sell it privately could get close to $4000, if I trade it in I’m guessing I’d get $2000 or less.

I would like to get rid of the car and pick up something else, either a Matrix or Subaru (2007’ish).

I also have some credit card debt that I’m trying to pay off and being hit with big car bills every year doesn’t help.

So I’m wondering what the best option might be….

1) Keep my current car, continue dealing with repairs and the eventual valve drop which will render it even more worthless
2) Sell or trade it in on something else and take the hit for extra amount I’ll need to roll into the new financing
3) Use my LOC to pay off the Focus and put what my regular car payment each month would be towards paying down my credit card, with the understanding that once that’s done I’ll need to pay off the LOC too.
4) Sell the Focus, pay off the remainder of what’s owing on it and then use my LOC to buy something else, likely a 2004’ish Matrix. Then put what my regular car payment would be towards paying down my credit card.

Any advice is appreciated.

[MoneyGuy]

I say number 4. No. 1 is flushing more money down the toilet. 2 is a reasonable option if you don't want to sell privately. 3 doesn't deal with a money-grabbing car. I'd sell the car or trade it in then get an inexpensive used vehicle about 5-8 years old, newer if you find a great deal.

[Table 5]

How big is that credit card debt? No matter what you do, I would think paying that off ASAP is the biggest priority here, considering the interest rate is probably pretty high. Even if it means driving a 10-15 year old Toyota for a while, I'd want to annihilate that debt as fast as possible.

[Table 5]

I do look pretty good in a pantsuit.

[bizaro86]

You didn't say how much your LOC and credit card debt are, and it sounds like your current car is a money sucking pig.

So I'd sell that, and put the negative equity on the LOC. Then, I'd pay off the CC debt with the LOC, if possible (your loc limit > credit card debt), and buy a cheaper car with whatever is left on the LOC.

Then, quit borrowing on the CC, and pay off the LOC as quickly as possible, at least by as much as your current car payment.

[shane_c]

Originally Posted by bizaro86

You didn't say how much your LOC and credit card debt are, and it sounds like your current car is a money sucking pig.

So I'd sell that, and put the negative equity on the LOC. Then, I'd pay off the CC debt with the LOC, if possible (your loc limit > credit card debt), and buy a cheaper car with whatever is left on the LOC.

Then, quit borrowing on the CC, and pay off the LOC as quickly as possible, at least by as much as your current car payment.

Have a 7K LOC available and owe about 7K in CC. Or maybe it'd be better to pay off the CC with the LOC and keep the money pit car.

[Ashartus]

I'd pay the CC off with the LOC first - you do not want to be keeping any balance on a credit card. If you owe more on the car than what the car is worth that also really isn't a good situation though and limits your options a bit. One thing you might look at is talking to a bank and trying to consolidate all your debts in a single low-interest loan (I was in pretty bad financial shape a couple years after graduating from university and did this - it really helped me get back on track). Then you could either sell the car and buy something cheap that will get you through the next few years while you pay down your debts, or keep the car for a while longer and hope that nothing major goes wrong.

[squiggs96]

Originally Posted by shane_c

Have a 7K LOC available and owe about 7K in CC. Or maybe it'd be better to pay off the CC with the LOC and keep the money pit car.

What rate are you paying on each the credit card and LOC? You may be able to call your credit card company and ask for a lower rate. With many cards giving you a rate from 1.9-4.9% to switch cards, your current card may be willing to reduce your rate for six months or so to keep your business. It doesn't hurt to call and ask. Even if they say no, you still are at the same spot.

[shane_c]

Originally Posted by squiggs96

What rate are you paying on each the credit card and LOC? You may be able to call your credit card company and ask for a lower rate. With many cards giving you a rate from 1.9-4.9% to switch cards, your current card may be willing to reduce your rate for six months or so to keep your business. It doesn't hurt to call and ask. Even if they say no, you still are at the same spot.

Already done and lowered

[Byrns]

Keep the car, pay off the credit card and then cut the card up.

[IliketoPuck]

This is funny, I was having this exact conversation with a friend last night.

My advice to him was to make a list of what the cost (interest rate) of each debt is, and attack that list from the top. So if you have a LOC for 7k, and CC debt for 7k, the first thing you do is pay that CC off immediately. If you look at it like this it makes complete sense: You pay ~18-20% interest a year on CC debt, and I'm assuming ~5-6% interest on your LOC. Just by transfering the debt to your LOC, you have made $1500 in reduced interest payments instantly.

IMO you should also consider selling that car, and getting a more reliable cheaper option such as a honda accord or something along those lines. I had my accord for years, and it was an excellent car that never broke down or required expensive repairs year after year.

The problem with the way a lot of people handle their finances is that they have this concept of premature affluence. If you can't afford to have a mortgage or expensive car because it is putting you in debt, then you need to find an option that allows you to save money for the future when you can afford the luxuries without putting yourself into a debt spiral.

I have a friend that lives at home still, but decided when he got a job to get a Lexus at 9% financing. The car payments are 25% of his GROSS income a month. How can you possibly save $$ and move forward like that? It is impossible.

Take a hard look at your finances, and your income. If they are not realistic, you need to seriously consider your purchases, and what you can actually afford.

[MoneyGuy]

Don't keep that money-sucking car.

Pay off the cc as soon as possible. Credit card debt is deadly.

[Rubicant]

I think more people need to watch 'Til Debt Do Us Part'. Credit card debt is devestating.

[Sliver]

Originally Posted by MoneyGuy

Don't keep that money-sucking car.

Pay off the cc as soon as possible. Credit card debt is deadly.

It doesn't exactly sound like this guy has a ton of money, so I'm not sure how "pay off your cc and buy a new car" is good advice lol.

Pay off your cc for sure. Especially if you have access to a LOC that can wipe it out. How could you not have thought of that already?

As for the car, it really sounds like you can't afford one. Is getting a higher-paying job an option or getting more hours at your current job?

[squiggs96]

Buy a BMW 335Xi or a Purple Mustang

[arloiginla]

Originally Posted by squiggs96

Buy a BMW 335Xi or a Purple Mustang

If you buy the BMW in carbonschwarz metallic (black with dark blue flakes) it sort of looks purple in the sunlight...best of both worlds

[shane_c]

Originally Posted by Sliver

As for the car, it really sounds like you can't afford one.

I can't afford a car that costs me thousands of dollars in repairs every year.

[Scoopdogg]

^^ Then you can't afford a car.

[calumniate]

How much driving do you do on a yearly basis?

[IliketoPuck]

Sell the car.

Use the LOC to pay off your CC debt.

Buy a car that is cheap and won't cost you $$ on repairs all the time.

Get a realistic budget of what you can afford and stick to it.