how do you handle car loans?

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iVillage Member
Registered: 03-25-2003
how do you handle car loans?
12
Mon, 01-30-2006 - 9:53am
Hi everyone. I am excited about the idea of paying down my debt and becoming debt free. Right now I have two "stages" to my plan. The first is to pay off my cc debt and my current car loan, which totals 7200 dollars. Then I will begin to tackle the student loan debt, which currently totals about 48K. I will jump on the private loans first as they have a higher interest rate and save the federal loans for last. Anyway, I only have 5 payments left and a balance of 1065 on my car loan. At that point I intend to start saving for a down payment on another car, but I doubt I will end up with much set aside before my current car needs replacing. I hate the idea of taking on another car loan when I'm struggling to be "debt free". I guess certain things like my car loan, mortgage, and student loans are those kinds of things that I will have to accept and perhaps not consider them when I consider myself debt free. What do you all think? Do you try to avoid car loans? I guess I'm just frustrated at the idea of finally paying off a substantial debt only to turn around and take on another loan and start over again. Ugh! I guess I will just continue to save up as much as possible to put towards a new car.

                          

             

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iVillage Member
Registered: 07-11-2001
Mon, 01-30-2006 - 3:55pm

I am a big believer in buying 2nd hand cars for cash. Interest rates on 2nd hand car loans tend to be higher than for a new car which is why cash is king.

The first car I bought in the States was believe it or not like a 97 Geo Metro for $2000. Had a ton of mileage and I ran it to the ground in 3 years, but it got me around when I arrived in the US, and I could afford a condo because I had no car payment. I did manage to get $300 for it at the dealership off my next used car.

My second car is a used 2001 VW Jetta V6. I bought it last year from a dealer in cash. I got the money for the car by taking a 2nd mortgage on my condo. I can then claim the interest on my taxes. I went to the dealership and said I have this much to spend in cash, not a penny more not a penny less. I got a car worth a couple of thousand more than I paid I believe because I bought in cash. My mechanic couldn't believe what a steal I got. I then refinanced and combined my first & second mortages together. So I just pay my mortgage every month. I don't see the car payment. It made the best sense to me at the time, and I can claim it on my taxes. Plus my car is considered an asset rather than a liability. I will drive this car till it dies. I am guessing that will be quite a few years from now.

I would love to enjoy a new car, but they make no financial sense to me. I once had a new car. So I've once been able to enjoy that new car feeling.

iVillage Member
Registered: 01-06-2006
Mon, 01-30-2006 - 10:16pm
I agree with everyone else, save your current payments when car is paid off toward the purchase of a new to you used car. The first 2 years depreciation can be 50% of a new cars sticker price. My dad purchased my first car for cash an 81' Corrolla (in 1992) with no Air and 90K miles (we live in FLORIDA!-thanks dad). I had to pay every single penny back to him for the car and did so with my babysitting and part-time job. I drove that car for 2 1/2 years and put it well over the 100K mark. We sold it for pennies on the dollar to a co-worker of his in 1995 and it is still running today. My next car again my parents were able to pay cash for it and I made weekly payments to them over the next year or two until I paid it off. It was a 1993 with 23K miles, new it sold for $15,000 and we bought it for around $7K, it still had 7,000 miles left of the original warrenty on it and I paid less than half what I would have new. I drove that car till it had 105K miles on it at which time the original clutch started to go bad, it would have also needed a timing belt, with a book value around $1200 and looking at $750 in repairs to be made I decided it was time to sell. This time I financed the entire cost of a 5 yr old car, my only criteria be that I got a dependable car with payments I could afford. Luckily dad was working in the dealership office this time and knew what dealer paid to take in trades and this gave me leverage in negotiating a price I could afford on a reliable car. I paid the car loan off early, I am not able to save the amount of what my payments were yet, but I am hoping to keep it going till I am debt free (4 yrs?) and maybe fiance and I will buy a newer truck for him first if my car is still going strong.

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