AboutKindred Beisinger Expertise I can answer questions pertaining to budgeting, savings, debt reduction, and total freedom from debt. I can assist in prioritizing expenses and obligations. I am willing to share and offer guidance in realistic money management, modest investments, and financial freedom. I am not an investment counselor, broker or accountant, I am a missionary that does not do fund raisers or ask for donations.
Experience I live comfortably and have been debt free since I was 40.
Question I am 30 married with 1 child. As gas prices go up, and people are trying to adjust there spending to make ends meet, I am trying to decide if trading in truck for small car would benefit us. I have had negative equity on my past couple trade ins and thus would carry over about 7500 dollars upside down on this trade in. I have been approved to either pay a high interest rate of 7.5% or higher with no money down to trade in, or put about $4000 down for the current low interest rates of 6%. I currently pay 400/month for truck payment for 4 more years and spend about 180 in fuel a month. The car I want would cost 340/ month (assuming I put 4000 down) but the down payment would have to go on credit card. I called my credit card to verify how much I would pay interest for a 4000 balance and they said 35/month for interest at my current fixed rate of 10.5 percent plus whatever my monthly credit card payment would be. It would cut my gas bill about 40% each month, however, as my truck gets 24mpg and the car gets about 40mpg.
A second option I have considered is purchasing the toyota prius which I do not think I would need to put 4000 down and would put my monthy payment at 540 or so but cut gas bill by 50%. I am not sure what to do and what would benefit us the most. If we can make ends meet for 5 more years sticking with our current vehicles, we can have alot of debt paid off. My wifes car will also be paid off in 4 years. I have also considered parking my truck and driving her car which gets about 34mpg but would double the mileage being put on her car each year. It would then be putting about 24,000 a year in mileage. Any suggestions would be appreciated.
Answer Dear James,
I will offer what I can. You are weighing several options and the best help I can give is to "whittle it down" to just a couple. So, process of elimination begins with these two. Don't put the down payment on a credit card. You cannot borrow money to reduce expenses. Trading upside down only digs the hole deeper, so if you are going to trade your truck, go ahead and take the slightly higher interest rate. But really, you don't want to be paying four more years on a truck you don't own. Just because it gets rolled into the next loan doesn't mean you're not paying. What you have to figure in this equation is the interest you would pay verses the gasoline you would save, and losing $7500 right off the bat is an awful lot of gasoline, even at $180 a month. I figured just the carry over against the present gasoline expense and it figured almost 42 months . . . I, personally think sharing the car makes the most sense at this time and removes the upside down factor, even if the car will be high mileage, when it's all said and done. Just go half way on that. Split the difference. Divide your miles between the truck and your wife's car. I do have one other thought on the matter. What about a small used "puddle jumper" is what we always called them. Cheap, older, no frills vehicle for work. Just a cash out deal. If you start sharing the car and saving the gasoline money from parking the truck, you'd probably have enough to buy a puddle jumper by the end of the year, then just sell the truck outright or trade it later when you won't be stuck with such a huge carry over.
I don't know if I've helped narrow the options or stirred the pot, but . . .
You sound like a bright, responsible young man. The best advice I can give is make the choice that reduces your debt the most rapidly. I really don't think any of us can continue to purchase and repurchase and invest and reinvest ahead of the cost of living. Avoiding debt is the best rule of thumb for life, regardless of the economy.
Kind Regards,
Kindred
www.eingedi.us
