Should I pay off my car?

@Lochoa (222)
United States
April 21, 2010 11:54pm CST
Ok so my husband got into an accident in Dec 09 and our car was basically totaled so we had to purchase a used car. We debated at first on whether to purchase an older car that we can just pay off or a newer used car with car payments. We didn't see any cheap cars that we could just pay off that wouldn't need alot of fixing first. We actually did find a 2002 Audi in GREAT condition at a reputable dealership bought it and was going to pay it off that same month and as soon as I took it home I knew something was up. I called them the next day and told them about it and a couple of days later they were able to take it in for repairs. Literally a month later they said they were going to buy the car back from me b/c the repairs were more then the car so they should've NEVER sold this car to me in the first place! If you all would have seen this car you would've never know anything was wrong with it! It looked perfect. During my test drive it was perfect! Luckily during this month they gave us a free rental car! So after this we opted in getting a used car from the dealership. So we did. Our car payments are less then our other car b/c we didn't want to pay that much anymore for another car. I have since lost my job, like 2 weeks after getting the newer car, and am stuggling on whether I should pay this car loan off or not. I pay 257/mo and my balance was 16K then I had GAP insurancce from my other car that if I bought a new or used car from my other car's financing dept they would pay $1000 towards my principle balance so now I owe approx 15K. Which isn't bad. It's a 7 year loan at 4%. My savings is about 15K so if I paid this car off with that we would have no savings but an extra 257/mo plus we would save on our interest since we wouldn't have the car anymore. BUT if I pay it off then we wouldn't have any savings? I'm currently trying to get a loan modification and our finances are right on the boarder line of YES or NO. So what do you all think? Should we just wait it out until we get a decision on our modification first so we have at least have a savings since money is like gold right now during this rough economic times. Thanks for your advice!
2 people like this
2 responses
@dawnald (84069)
• Shingle Springs, California
22 Apr 10
I would not, under any circumstances, liquidate all the savings to pay off the car. If the car payment is too high for you, you could maybe use half the savings to refinance it or something. But the thing is, you can use the savings to pay your bills on an ongoing basis while you look for a job. And you never know what might come up where you might need the money.
@Lochoa (222)
• United States
23 Apr 10
Yeah I know! Thats the main reason why I haven't paid off my car b/c I know if I do that's all our our emergency money and we'd be left with nothing but a paid off car and an extra 257/mo.
1 person likes this
@Lochoa (222)
• United States
23 Apr 10
Sorry..an extra 257/mo that we'd prob spend and have to take a couple of years o build our savings to that amount again and I'm just not sure it's worth it
1 person likes this
@callarse1 (4786)
• United States
22 Apr 10
Good question. Are you getting unemployment (UE)? You didn't say that? Does your husband/boyfriend work? What is your monthly income? (Net income after taxes). What is your total amount of bills each month? I'd figure that out. I'd figure our if I'd get UE, how long, how much. I'd figure out if I'm going to have a job soon. If you have lots of other bills, spending all your emergency savings on one bill (car loan) won't do you any good. If you can make all the minimum payments now while looking for a job that may be the best thing to do. Take into consideration it would take a little less than 5 years to pay the car loan if you pay just the minimum each month. However, since you have lots your job you have no choice. I'm sure if you can answer some of my questions above, we can better assist you as to what you can do with your bills.
@Lochoa (222)
• United States
23 Apr 10
I am receiving UI but have recent;y started working so I am going to be receiving less then my UI a month. After all our bills we barely make ends meet. We would have like $4 left over every month. And that's not much but that's after ALL of our projected bills. I mainly calculated "worst case scenario" considerition electric and water differ from month to month. My husband does work but he's had 2 pay reductions last year and no OT so our income is limited. Basically if I pay off the car we would have 257/mo extra but no savings. I keep going back and forth on this but I'm just not sure. I think I'm just in Pacnic mode and feel like I need to do something. Eliminate some bill, ya know? There's not much I can cut out. The only other thing is adding more allowences on our W4 right now I think we're both claiming Married 0. I don't want to get a 2nd job right now b/c if I do I prob would make too much money to try to qualify for a loan modification. We own approx 800 sq ft condo and pay 1700/mo! And with us both working full time we make too much money but now that I would be working PT we'd make just enough :( I don't want to give my house up. We're still current on all our bills and I would like to keep it that way.