Upside Down

[LJay]

I recently bought a 18-month old truck from a private party. It was $43K new. 18 months and 23,000 miles later I got it for $25k. So it depreciated $1000 a month. I can afford new, but I prefer used. I save up and pay cash. I like to keep a vehicle for 10 - 20 years. I have other priorities than expensive new cars.

My Advice: use credit to buy appreciating assets. Use cash to buy depreciating assets. If you have to delay a purchase because you don't have the cash, then be honest with yourself if you really need it or can wait. 150,000 miles on the right modern vehicle is no big deal.

5 years from now that new Prius will be obsolete due to advances in assisted driving technology. I'm going to bet that you're not someone to keep a car forever.

The modest monthly difference in loan payments seems irrelevant. Getting out of debt earlier is worthwhile if that is possible. It seems like the bigger issue is that you now realize you bought the wrong car for you. You might have to live with your existing car for a few more years.

If the dealer makes you an offer and doesn't give you a few days to think about it, then that is just a pressure tactic to close the sale. There are car buying services now, and you can get quotes from competing dealers right over the internet. You can do most of the legwork from home. If you walk uninformed into a dealership, you just made yourself a target for paying too much for more vehicle than you need.

@ Camfer: AMEN AND AMEN!!! I can't say that I have always been in a position to implement this advice but it is certainly sound. I am 68 years old and I have had five cars. It would be four, but one was totaled while sitting at the curb. This was done by a passing drunk idiot at midnight while I was in the house watching TV.

Cars are for transportation. If you have the urge to drive something fancy, you can always rent it for a weekend and get it out of your system.

[InbetweenDreams]

Well after considering what my spending spree this year has done to my credit I've deiced not to pursue the car for now...

If I were approved for such a loan I would more than likely get a very very high interest rate. I had never heard of interest rates being over 7% but shit they do exist and you would have to be crazy to get into one of those, but I suppose some people do because they have no choice.

Anyway, my thoughts are of course to pay off the credit cards. Both are well, pretty much maxed. The good news is that I'm no longer carrying the cards on me so I cannot use them. One card has a promotional balance that must get paid off. So I'm looking at apply for one of these credit cards that allow you to do a 0% balance transfer, gives me 18 months to pay that off interest free and will help attack the promotional, interest free balance and save money overall on interest. Now I don't know much really about credit, but I do know such things are bad for the credit score but in the long run, especially if I stick to it, it will be for the better. I don't think there's anything wrong with having more credit cards, just the overall picture of your credit.

Thoughts? Perhaps this is most sense I have made since I created the thread?

[LJay]

To begin with, pay those cards on time! I try always to add something to the minimum balance, even if it is only five or ten dollars. If you can manage a little extra in mid-month that is good, too.

Look up your credit score and keep it in mind. If it is not high enough you may not be approved for a no interest transfer of balance and that does not look good. In many cases the card company will hold out a transfer at 0% interest as a carrot and then, when you apply, only give you a partial amount of your request. If they do, remember that you are adding yet another payment to keep up with and that may not be easy or at all desirable.

You might talk to your bank about a consolidation loan to see what rate they offer. Beware, that can be another pit into which you may fall.

It is, however, worthwhile to have an ongoing relationship with a full service bank. If you do not have one, work on that. Just an example, I am 68 and have been with the same bank since I was about 22. Cute Story Department: I once needed a loan and knew it was iffy. I went in and talked to a banker who happened to be one of those well kept and just out of college guys who had gotten a bank job. He asked me why I was coming to his bank for the loan. I simply told him that I needed the money for a furnace and that I had been banking with his bank since before he was born and I thought I was worth the risk. Got the loan on good terms.

Think of your credit score and your banking consistency as your financial reputation and guard it diligently. Be careful. Bankers smile a lot and seem to be generous but they are like foxes...quite wily.

[AlohaShannon]

Wow, quite the predicament you're in!

First off, cut up those credit cards immediately!

Second, create a budget for yourself and get $1000 in a savings account to use for emergencies only.

Third, pay down your debt using the snowball effect (if you need help with this then message me and I'll explain more).

Lastly, keep your Challenger for now, continue to save up some money, sell it on your own (you'll ALWAYS get more than what you would for trade at a dealership), pay the difference of what you owe with the money you save, and then buy something else once you're clear of the challenger.

If you can't get ahead on your debt then think about selling stuff off so you can start paying down the credit cards. My ex put me in HUGE debt and I followed a very simple formula to become debt free (aside from a car payment) in about 2 years. It takes discipline but it's totally doable!

Good luck!!!

[Camfer]

We keep getting snippets of your financial situation, but without the entire story, we might not be giving the best advice we can. If you want, you can take this offline with me or another trusted person and maybe get you a simple plan together to get you debt free in a reasonable amount of time. It's a lot easier to get into debt than it is to get out of debt!

Keeping the existing car for now makes good sense to me. I think you made the right decision there.

The suggestion to use a snowball strategy has its merits. You are numerate, but need to develop healthy financial habits.

The two strategies are snowball and highest interest rate first.

Snowball: write down all your debts in order of smallest to largest. Pay off your smallest debts first while paying the minimums on all others, so you have quick milestones that you achieve by completely eliminating certain debts. Then you use the money to attack the next smallest debt and eliminate it next, while still paying the minimums on all others. You do this until you are down to the last, largest debt.

Highest interest rate first: Write down your debts with highest interest rates first down to lowest interest rate last. Pay the maximum you can each month on the highest interest rate debt while paying the minimum on the lower interest rate debts. Then once you eliminate the one with with highest rate, you attack the debt with the next highest interest rate.

The first strategy builds discipline with fast feedback. The second strategy costs less to eliminate the debts, but it might take you longer to eliminate the higher priority debts, so psychologically might be the less desirable strategy for you.

Since you are numerate and computer literate, I recommend you put it together in an excel spreadsheet. You should be able to make a graph every month or so that shows you your declining debt balances. You can make a graph that shows a larger and larger precentage of your payments going toward principal and less and less percentage going to interest. These kinds of visuals may be useful to keep you on track.

[InbetweenDreams]

Well my probem is that last year, starting with the Challenger I went and bought a lot of expensive stuff that I probably shouldn't have. I have two cards, both which are pretty well at their max totaling around $8k. I'm not missing payments on the cards just that the car payment and the credit card payments make things a bit challenging at times.

But i decided I would go and see what they would off for the Challenger, they offered book value and wound up getting the Prius. Net cost at the end, including the financing, ended up being around $2,000. So my idea having a lower payment, much lower fuel cost and insurance is to pay off the credit cards. One of the cards has a $1,900 promotional balance, interest free which the promotional balance is down to $1,500 but I have charged all kinds of crap. Some of which was legit, like I had to replace a phone which cost damn near $700. Other things, like the bike trailer shown on my blog, not needed... A lot of hiking gear and so on. My problem is that I've bought too much crap and now I'm regretting it.

I don't have rent or a mortgage so that helps, but likewise I should be saving for a house and the next vehicle I actually do need. Sooner or later I will have rent or a mortgage.

I did make a amortization table and yeah a shit ton of money goes to interest, especially in the beginning, this is so that the bank gets their money back before you default since typically those who get higher rates are also riskier. So it saves to pay more. I do plan, particularly once I get the cards paid off, to refinance the auto loan to a lower rate.

So happy Prius time for me lol

[NativeSon]

[Camfer]

Maybe you can commit to keeping the Prius for 10 years?

[InbetweenDreams]

Maybe you can commit to keeping the Prius for 10 years?

Definitely for 6 lol

10 years would be nice. My sister has had hers for 9 years and still does fine. I don't think the fuel economy is quite what it was but she tends to drive with a heavy foot. She cracked me up when I was up there. I made it to her place before she got there and she comes pulling in her driveway and squealed the tires a little bit lol

So far the Prius is averaging around 65+ mpg and I don't drive particularly slow and also allowing time for break in as well. The tank holds 11.3 gallons and apparently the car thinks it will go over 700 miles on a tank but it just might. I was reading on Prius chat and one person who lives in Kansas thought there was something wrong with the gas gauge...he was actually averaging over 85 mpg on his 2016 Prius, they keep making these better and better. Now I won't get that around here but I might be able to hit 70 occasionally.

[Camfer]

Alright, so we've got a goal that could be set here, that sometime before 2022 or 2026, you'll have such good credit that if you need a new car loan, you'll walk into the dealer with a pre-approved low interest rate loan from a financial institution with whom you've built a long term relationship. This will enable you to get a lower rate than the dealer loan markup.

Do they make a 4WD Pruis I can use to get to the farm here? lol