Whatever, I did get more money from the insurer for this car that what I could’ve gotten on the open market, so maybe if I subtracted that it wouldn’t have been a bad deal. Regardless, there is something about being sure your car will start in the morning and will get you from point A to point B.

I do believe one should buy what one should afford, and this guy’s purchase was not the smartest financial decision. However, now that he has the car, he has to think about what is best for him financially and it may well be that paying off the loan as quickly as possible and then driving this car until it breaks is the best option.

If he sells the car now then he’ll take a huge hit on the depreciation. Might as well hang on to it and eat the interest for a year or two.

I’m working with the assumption that they have a pretty good income. If the car payments are more than 10% of their income then sell it, take the loss and buy a more practical priced car.

In any case they need to work on their personal finance. Running out and buying a new car with high interest right after bankruptcy is not a good first step. They should be loooking to reduce their expenses and stop keeping up with the jonses.

That transmission job (although expensive) would’ve gotten you another 100k miles easily I bet, for the $2k is probably cost — that’s cheap in the big scheme of things.

Whatever. I’d tend to agree with JLP’s advice – pay off the loan as fast as you can. In terms of selling it and buying a cheaper car, I’d just sit down and tried to do some math: how soon he can repay the loan, what it would cost him, what kind of used car he could get, etc. Keep in mind that it’s not clear if he would clear much money at all were he to sell the car; for all we know he could be upside down. It is quite possible that were he to sell the car he’d be at 0 or below and with no car.

@BG – I did exactly the opposite when I was young and came to an opposite conclusion. My very first car was a used one. This was 1983, and as I got my MS/CS, my parents bought me a car. I was a new driver as I had had no car in grad school and a terrible one at that. Combine this with the fact that my parents weren’t exactly rich having come from the USSR only 5 years before that, this was the only choice. And a pretty good present too. The car was a 1978 Cutlas Calais (if I remember correctly, I could be off by a few years), and it was worth $4300. I totalled it after about 4 years – my fault entirely. But… After I totalled it, I did some math. While I owned it, I had to replace alternator, distributor, transmission, exhaust pipes and muffler and I don’t even remember what else. When I divided the total amount of money I spent in 4 years that I had this car, I got more every months than payments on a new smaller car would’ve been. So my new car was a Camry; I got it for around $12600, paid about half in cash and financed the other half. Don’t remember how much the payments were. The interest was deductible at the time too. In a couple of years (don’t remember) I simply looked at the loan, determined it was costing me way too much money, and sent the credit union the check for the full remaining balance. Whatever it was. Since then I am buying new, though now I am able to pay cash. Not that I wouldn’t consider a loan if I ever see the interest rate below CD rates.

I have to say, though, that so far none of new cars I bought were over 20K. This 87 Camry I drove until 1995. During this time there was a period I commuted 46 miles one way, so by that time my mileage got over 100K and I started to get nervous. I sold it for about $3700, and bought a new (95) Corolla for cash (between 14K-15K out the door). In 2003 my parents old car broke down, so I gave them mine – they still drive it. It didn’t have that many miles as I no longer commuted. Instead, I bought 2003 Corolla for around 17K (out the door). This one I totalled in 2006; got check for over 13K from the insurance company; added a little money and bought a new Civic – I think a little over 18K in total. I don’t remember the exact numbers.

At any rate, I only look at new cars nowadays. However, unlike this guy I can afford them.

Regardless, people make mistakes, especially young people. But he just really needs to do some math and figure out whether it makes more sense for him to sell and buy a used car or keep this one, but he should pay off this loan ASAP. I’d imagine most of us here would love 18% return on our money.

I went as basic as I could get, but had to finance through Ford at a ridiculous interest rate. Out the door, the loan was about 23K @ about 20% – a lot like this situation. I would have had to give up student/family rebates, etc to finance through my CU and would have financed about 25K. Doing the math, it would have cost more financing initially through the CU rather than doing 6 mos. w/ Ford then doing a refi.

I lived on Ramen and water and worked as much OT as I could get for the next six months. My payment was about $500+/mo and I tried to hit the $600 mark. Six months later, when my contract w/ Ford was up, I refinanced ~ 20K with my CU at ~5%…I was able to lower my payments and shorten my term all in one shot.

Four years later, I’m a few months out from paying it off and it has worked out. I don’t think this gentleman made a bad decision – for me, slim pickings in the job market meant a longer commute, etc. You make do however you can and if that means having to stretch your budget a bit so you can keep your job…then you work with it. If he needed the car, then he needed the car.

I think the reader’s move to double the payments to pay it off quickly might be good for his/her credit score!

The key is to focus on paying the car payment, and not to run up other credit debt again. While I’m not a huge fan of budgets, this reader should really consider using one.

A lot of this turns on the security of his income and lifestyle.

Debt is risky and you feel like a slave. When I see beautiful cars driving around, I think of the monthly payments and lack of equity, it makes me feel a little sick.