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Help a Reader: “I Made a Really Awful Decision.”

by J. Money on Wednesday, January 4, 2012

gr8 scot license plate

This is a tough one, indeed.  Here’s the email I got from a fellow reader of BudgetsAreSexy. Take a gander, and then leave your thoughts/advice below?  Thanks!

I’m a real pickle, and my Google skills do not have me any closer to solving it. :)

I made a really awful decision. At 21 I walked into the Ford dealership and signed $18k of my life away for a Ford Fusion. I paid far too much for it, the Carfax has a ding on it, and I can’t afford it. It took me quite a while to realize it though! (Also, my grandparents co-signed for it.) I can make a million excuses, but what I have the most of is REGRET.

Now, I know– kick myself in the rear and never make that mistake again. But that doesn’t help this 2 ton anchor weighing me down!

Right now (23) I pay $346 per month on said vehicle, and I pay $200 in insurance every month (damn you Michigan and your high auto insurance rates!). J, let’s be real here — I’m still in college and I make about $25k/year. I can’t afford this in any way/shape/form.

What is worse is I can’t find a way out and I’m starting to feel mighty desperate. I don’t even have much credit, and my debt to income ratio is so high I can’t get approved for a card or loan independently. I by no means have the resources to come up with even a few thousand dollars cash– right now I’m very much paycheck to paycheck and my savings account is at $10. There isn’t anyone who can lend me any money. I also was unemployed for six months last year and have an eviction on my credit report.

Is there any way out there to get a little breathing room? I’ve thought about trading my Fusion in for a car worth 5k or so– but from what I can tell, most dealers won’t allow you to trade in a car for less than the one you want to buy.

I’m trying to desperately hard to be financially responsible! But between the high car payments and the rest of life, I can barely keep up much less get ahead. This car payment is the amount of RENT in my area, and I’m crashing with my grandparents 35 miles away from work and driving in every day because I simply can’t afford to even rent a room.

I apologize for the sob story, but if you get a moment to think on this and have any suggestions, I would greatly appreciate it!

OUCH.  The first thing that came to my mind was to advise her on getting ANOTHER job. I don’t care what it is, but *anything* will help to reduce this massive amount of debt and stress (or even yet, get a *better* job).  It’s obviously not optimal as a student who already has some sort of a gig going on, but luckily we’re given 24 hours in a day to max out as much as we need to, come hell or high water.  And since she didn’t mention it specifically one way or the other, maybe there’s room here to get some more income going? (Check out some of our side hustles for good ideas)

The other option she touched on was possibly trading in her car, but I think she’s right in that you usually can’t do so for a much lower valued vehicle.  Though you could always sell it and take the loss, then try and get another one right after?  At a much smaller cost?  It wouldn’t be easy of course, but it’s definitely doable.

Those are the best 2 options I see – what about you?  Have you ever been in this predicament before?  What would YOU do if you were here? (I know it’s hard without having all the facts and/or knowing anything about the reader whatsoever, haha, but do your best ;)).  At the very least she’ll have more to think on, and hopefully get pumped up enough to get out there and make it happen!

Thanks guys, you’re awesome :)

—————-
(Awesome license plate captured by Gamma Man)


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{ 47 comments… read them below or add one }

1 Andrew January 4, 2012 at 6:46 am

I’d say sell it, use part of the money to buy a second hand car that’s got much lower insurance and petrol, put the rest in emergency savings, and live with the repayments but enjoy the lower insurance/petrol costs. Not really much you can do except hope for a local job.

Whether you do that or not, you could start a car pool. get 4 people to do it and you’re only driving 1 day a week. Saves on petrol for everyone.

Good luck.

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2 Maria Nedeva January 4, 2012 at 6:51 am

I’d say sell it and cut your losses. Making a mistake like that is bad enough; persisting with it is …well not good. Also get rid of the regret and self-blame: the important question is whether something has been learned.

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3 DIana January 4, 2012 at 7:55 am

If she owes more on the auto loan than the car is currently worth, then she will either need to find someone really stupid to buy it or manage to pay down the loan. I’m assuming that since the payment is so high, she has not been paying more than the monthly minimum to keep the owe/value ratio even.

SO, you can trade in a car for a cheaper car. (Last year, we traded a $25k Subaru STI for a $15k Honda Accord — both were used) Since the Ford Fusion is a hybrid, depending on cosmetic and mileage factors, it should be valued higher than say, a Ford Fiesta or Focus of the same year — not hybrid.

If she doesn’t owe more than the car is worth, try to sell it herself (most of us know, that lands you with more money for your vehicle). If she can get cash for the vehicle and *at least* pay off the loan, then life will be a heck of a lot easier.
She also didn’t mention if public transportation is an option where she lives. Sometimes it is a big pain in the butt, however even the smallest of towns usually have a decent bus system, especially in a college town. Might make life a little less convenient, but if she can get out from under the car loan *and* use city buses for a year or so to save up for a car she can pay *cash* for, it would be optimal.

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4 John @ Frugal Gearhead January 4, 2012 at 8:06 am

I would say sell the car and cut your losses. Hopefully you are not too underwater on it. Also I think 5k on a car is rather luxurious for a college student. I have made due throughout college with a car that cost under 2k, even now my daily driver only cost me only 1700 over three years ago. I would suggest looking into chevy/geo prisms from the late 90′s-early 2000′s. They are rebadged Toyota Corollas, but never end up selling as high due chevy/geo brand attached to them.

After you get your downgrade sorted out, you should make yourself a little safety net. Similar to what I talk about in the post on my blog. Create Your Own Warranty     

Good Luck and Keep us posted on how you solve this.

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5 Crankymommy January 4, 2012 at 8:36 am

Oh dear. Sell the car yourself to an individual not a dealership. You can look up the KBB value for free online – use that and classified listings for similar vehicles to figure out a competitive price. Buy a junker to get you to and from work (with a 35 mile commute I’m guessing public transport isn’t an option) and use the difference to get as close to paying off that debt as possible. Pick up a weekend side hustle and apply all that money to the remaining debt until it’s gone.

I know you’re in college and need time to study, so plan on giving up having a life until the debt is done. Desperate times call for desperate measures, man.

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6 So You Think You Can Save January 4, 2012 at 9:06 am

The first thing I would do is start from the endpoint and ask ‘What can I afford as a monthly payment?’ Start from there and work backward.

She might have to go to her grandparents and explain the situation. They may not give her money for another car but if she’s ‘underwater’ on the current loan, maybe they would be willing to pay that amount as a loan plus maybe some as a down payment for a cheaper car. She would then have a personal loan payment to them as well as a loan payment to whoever financed the cheaper car.

I agree that this is not a sustainable situation but I also think it’s important not to rush into a decision, as rushing caused the problems the first time. Even if the plan you come up with sucks, you still need a plan.

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7 kasey January 4, 2012 at 9:29 am

J’s right – side hustle, or an extra job for awhile. Any way you could barter for a room close to work and school, then you could take the bus and sell the car (CarMax, a private individual)? I’m thinking house sitting, pet sitting, anything like that? I’d also go talk to student services at your school – do they have any programs that can help you out? The more people you ask, the better your chances at getting a creative “aha” answer – and don’t be ashamed, you’re recognizing a mistake and taking steps to get things in order and no one should fault you for that.

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8 DB January 4, 2012 at 9:35 am

How much do you still owe on the car, and how much is it worth currently? Not enough info to go off of. If you are upside down (likely as it sounds like you bought itt used for $18k 2 years ago, a fusion probably depreciates faster than the loan balance) and cant find someone to let you roll that difference into a loan for a cheaper car you might be able to trade it in and roll that into a lease possibly if you dont do a lot of mileage. If you went with something low end like a basic Kia or Hyundai at least you can get lower payments that way. Then when the lease is up look for a CHEAPER used car, like around $2000 or less (not from a dealership). Ego will take a hit but bank account will be much happier. I will never have car payments again, and it sounds like you are learning your lesson on that too.

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9 Brian January 4, 2012 at 9:45 am

There should be plenty of seasonal tax preparer jobs in your area. They make for some great extra income this time of year. I do it and it is a great way to make some extra scratch.

I like the idea of negotiating with your grandparents to see if they might possibly be able to cover some of the loan (but sign a “contract” with them on how you plan to pay them back for the extra payments they are making).

Also the option of selling and taking a loss is doable. You can get a decent car for 3 – 5K that should last you through college. Good luck and remember this feeling when you are making the big bucks after graduation, that way you won’t lifestyle inflate as much!

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10 Kacie January 4, 2012 at 10:50 am

Yuck. Ok, so we’ve established you need your car to get to/from home and school.

Can you ride-share with people and have them help pay for your gas? Can you shop your insurance rates around and see if you can find savings? $200/month is insane! We pay $50ish/month for 2 vehicles in Indiana.

I think trading in for a cheaper car is probably the best way to go, and roll the difference from the Fusion into your next loan. Be very careful here that your situation won’t be even worse with higher rates/higher monthly payments.

Do whatever you can (legally) to get more money. Side jobs are a must. Selling things you don’t need — must.

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11 Nick January 4, 2012 at 11:00 am

My first option would be to get another gig. Sell anything you have. Get yourself out of the mess. Working extra will pay HUGE dividends beyond the car. An extra $1,000 per month (deliver pizza, sell anything in your house that (a) doesn’t have a pulse and (b) you haven’t used this month, I don’t care what it’s worth, go to elance and we what you can find – see j$’s side hustle series). Find a night/weekend gig bartending or waiting tables. That’s the best option, IMO for getting out of this mess.

If not, go to the current lender and see if they’ll let you sell the car and sign a note for the difference. They’re unsecured for that amount anyway, so if they have half a brain they’ll know that’s their exposure anyhow. Yes, even if it has a carfax ding. The car won’t go up in value so the current unsecured amount is a sunk cost w/r/t security. Then buy a clunker, not a $5,000 car.

If not, then try and save up the difference to pay off the difference between the value and what the car won’t sell. Or borrow it if you can (I know it’s tough). At least you’ll owe less.

Hope it helps.

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12 Daniel January 4, 2012 at 11:09 am

There’s something else here that nobody has touched on, because the reader didn’t go into details about her financial situation outside of the car, but what I am wondering is if there is other debt involved?

She said her debt to income ratio is extremely high. Based upon the income estimate given, I would guess that the reader’s Net income ranges somewhere between $1,100-$1,400 depending on local taxes, if she has health insurance, ect. But let’s say she nets $1,200 a month. With her car payment of $346 per month, that is a debt to income ratio of around 29%. Although a little high, this is considered an acceptable D/I ratio normally, so I can only assume that there is more debt.

I’ve never had bad credit so my experience here is limited, consequently it may not be possible to improve the debt much, but the first thing I do when I’m looking to save money is to look for ways to get a better deal on the money I’ve borrowed. I would ask what kind of other debt you have, credit cards, student loans, unsecured bank loans? Do you ever get those zero percent interest introductory offers from c/c companies? I have used those to save a ton on interest. When one runs out, someone else is already looking for your business, so you can almost keep your c/cs at 0% all the time. Yes, there are transfer fees, usually 3% of the balance. This is where you do a Cost/Benefit Analysis. If you have a $3000 credit card balance, and you’re paying roughly $45 per month on that in interest, then in two months, paying the transfer fee of 3% ($90) pays for itself, and then you gain 10 months of interest free payments (if it is a 12 month offer).

Also, who is your car loan financed through? Is it through some big bank? I was able to refinance my car loan through my local credit union that I bank with, and it cut my interest rate by about 3 points. Also, when I initially financed my car, it was a 6 year loan with a big bank. I paid that for about 14 months before I refinanced with my credit union. When I refinanced, I went for the 5 year loan, so my repayment period basically remained the same, but it cut my monthly payments by over $30 a month.

So my advice would be to get the best rates you can on all your debt, consolidate when possible and when it makes sense. Nickle and dime your expenses as much as possible. Have you shopped around for cheaper car insurance? What about your cell phone bill? Can you save money there? Where is the other $700 a month of your income going? Do you have a budget? If not, you need one. You need to know exactly where every dollar you spend is going. If you have a smartphone, I recommend the Financisto app to track your spending. This in combination with a good budget on a flexible Excel spreadsheet works great for me. Also, does your insurance company offer discounts for multiple services? I get a discount just for having a checking/savings account with my home and auto insurance company, even though I don’t actually bank with them regularly.

I hope some of these tips help, and good luck!

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13 Aaron January 4, 2012 at 11:27 am

I’ve been there before. It stinks. I didn’t do this – but have had a couple friends who have – is to have someone else step in and take over the payments. I don’t know the legality of this – but I know it can be done.

Two cents.

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14 Erin January 4, 2012 at 11:28 am

I do not think you can sell a car with a lien on the title unless you pay back the full balance owed to the creditor immediately? No one is going to “buy” the car and the debt, so how would the creditor’s interest be protected with a Title transfer in which they have an interest?

You’re approximately 2 years into the loan (21 now 23), so theoretically you have 3-4 years left (depending on whether it was a 60 or 72 month loan), I say you eat it and live with the consequences. Because your grandparents are cosigned on the loan, anything less than making the payments in full and on time (or paying the entire loan back) is not an option.

Is there any way that you can make money off the car? Look on a car pool website and see if people will at least share the gas expense or pay you a flat fee to commute to work or school with you?

Could your grandparents (or someone else) help you by paying your full 6 months or year of auto insurance (you always get a discount for paying all at one time rather than monthly) and then you could pay them back monthly? Is there any family member that would be willing to gift you even $100 a month until you find a better paying job?

I also agree with J$ that now might be time (even with work and school) to find a second job. At one point, I lived in Farmington Hills, had an 8:30 – 4:45 job in Detroit, took 3 night classes @ OCC and worked @ a liquor store 2 nights a week and on Sundays – so I know it can’t be done…although I’m unsure of what your work schedule is like. I’m throwing in the places as reference since I live in Michigan (just north of AA) and you will know how crappy the commute from FH to Detroit is :)

If you need someone to vent to (or a reference for the fancy liquor store I used to work at – it was nice, I just found a better paying side job – yep still have 2 jobs) in Michigan, J$ can give you my email addy.

I’d also drive as little as possible so the low miles helps the car retain as much value as possible. I know that sounds counterproductive since I’m also advising you to keep paying for it, but I just don’t see a real way to NOT keep paying for the car.

I also agree with looking at trading it in. No harm in trying. I know someone that works @ the Dodge Chrysler dealership in Westland if that helps!

Good luck – you will make it through. I’m still in the midst of a bad decision of cosigning with someone for a quad that I don’t even have possession of, so I can feel your pain.

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15 Robin January 4, 2012 at 11:29 am

Sell the car. I advertised my husband’s car on Craigslist and it sold in two weeks and it was 10 years old. I’m sure this car will move fast. If you MUST have a car then get a cheap one that gets you from here to there. Set up an emergency fund of $500-1000 in case of an absolute emergency and put the rest to debt. It sounds like you’ve learned your lesson. I also like J’s advice that if you can, get another part-time job. It will be worth it when you are out of debt! Best of luck to you.

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16 LB January 4, 2012 at 11:33 am

If you can’t find someone to take the car and can’t use the bus (live in a rural area), you might consider going to school part-time in order to work more and put more money into the loan. Or like J. Money said, take on a part-time side hussle and throw money at it. Not ideal, but I don’t know the specifics enough to help out. All I know is I hate loans and don’t want to do one ever again. Hell, I could have gotten a good deal with my braces and not paid interest, but I didn’t want to pay the payments :)

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17 Michelle @ Making Sense of Cents January 4, 2012 at 11:34 am

I would say sell it also!

And wow, their car insurance is super high, I bought my car brand new in 2008 for around $25K, and my car insurance is only around $60 a month for full coverage.

Maybe they should also see if their insurance can be lowered at all?

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18 Tea January 4, 2012 at 11:36 am

You don’t mention any student loan debt in your email. Presuming you are not maxed out on sthem, I would suggest taking out the maximum student loan you can, and apply it to the car. Interest rates on them are reasonable, and payments are not due until you graduate. That should give you some breathing room until you graduate and hopefully pay off the loans quickly.

I would encourage you to keep working through college and pay off as much debt as you can. While this might seem like a huge mistake, a difficult lesson to learn, better to have learned it while you are young and don’t have family depending on you. I am sure you will make wiser financial decisions in the future.

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19 Kris @ Debt-Tips January 4, 2012 at 11:38 am

Wow, tough decision to learn the hard way. I really hate to see good people have to learn such tough lessons. Of course, that doesn’t help solve the problem. Sure, you can try to get creative, but selling the car is probably the quickest, easiest solution. And the sooner the better. Good luck!

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20 Jeffrey January 4, 2012 at 11:45 am

I don’t think this is being framed properly, and I don’t see how we can say “sell it” without knowing if what she owes versus what it’s worth. Everyone is saying “sell it!” but (as Diana pointed out above), she probably owes more than she can sell it for! She doesn’t have any savings, either, so paying off the difference in the loan doesn’t seem to be an option.

I would say sell it, of course, if that’s even possible. It’s tough to say here as there are no easy solutions.

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21 Andrea Travillian January 4, 2012 at 12:12 pm

I am sorry you are in this situation. I wish there was an easy solution, but there is not! At least you have realized the problem and are trying to solve it; many people would not have done that.

So here are your options as I see them:

1. Let it get repossessed – this is bad as this ruins your credit even more, but more importantly ruins your grandparent’s credit. Plus they will come after you and your grandparents for the difference in what you owed versus what they sold it for, and they will sell it for next to nothing. Avoid this at all costs.
2. Sell the car – if the car is worth less you will have to come up with the difference. If it is worth what it will sell for then you still need money for a car. I am going to guess it is not worth more than you owe. That is very unlikely with a new car only two years in. So as much as this solves your payment problem, it creates the problem of needing cash for a substitute.
3. Get an extra job to make more money to pay the current one down/save for money to buy a cheaper car. Obviously not helpful to have to take on more work, but people lots work during school all the time. Both my husband and I worked full time while going to college. (Waiting tables is a great way to make good extra money as you can typically do it in less time and still make good money if you pick the right establishment).

If I were in your shoes, I would focus on number 3 until I could manage number 2. It might be a tough few months to a year, but you can work through this. Good luck.

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22 AverageJoe January 4, 2012 at 12:15 pm

I’m lovin’ Daniel’s tips–refinance option?–on top of J’s side hustle idea.

I can only add that I like talking to experts in this area. She said (and others agreed) that it looks like the car trade in deal is a dead end. But has she actually talked to a car dealer or two to discuss possible options? Maybe they know some program she isn’t aware of….

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23 Edward Antrobus January 4, 2012 at 12:17 pm

It’s certainly a tough call. My wife was in a similar boat before we got married. For all her good traits, math isn’t her strong suit, and calculating loan payments isn’t exactly straightforward either. But she bought a pickup after the dealership told her the payments would be $400/month. When she got the first bill, it was $800. $400 was around the max she could afford. The dealership absolutely refused to take it back. They didn’t own the loan, so they could care less if it got paid; they got their money. She never made a single payment and it was repo’d. It’s sale at auction covered court fees and she was left owing the entire purchase price of the vehicle, without the vehicle!

As far as acutal usable advice, I like Tea’s. A buddy of mine did that with his credit card debt in college.

@Kacie, I can believe that’s more or less the cheapest insurance she can get. When I lived in NJ, I had minimum coverage for 1 car at the lowest price I could find. Then I moved to CO, got married and got the minimum coverage for 2 cars at the lowest price I could find. And now I’m paying HALF of what I used to.

@Daniel, if she has bad credit, she probably won’t qualify for a card that will give her a 0 APR promo offer. Back before my credit started improving, I couldn’t even get a card that I had been “pre-approved” for!

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24 andi January 4, 2012 at 12:47 pm

How much of your schooling do you have left? If it’s just a semester is it possible to just stick it out a little longer? It sounds like you’re stretched incredibly thin, but still making it. Is there any way to trim down school costs? Are you at a public, private or community college? I literally made every mistake in the book when it came to financing my education, so I can definitely provide more insight here.

Have you shopped around for other car insurance? The neighborhood where you live can change your rates. Do you have your address changed on your insurance to your grandparents house? Mint.com is a finance website, but they also offer you resources for insurance… The same you can find from googling, but just handy to have everything all in one place.

I agree with finding out the value of the car, listing it and purchasing a significantly cheaper car and paying off what you can of the current car loan. When my brother purchased his car a year ago, there was a clause in the loan about being able to let the car go, if he ever lost his job, etc. Have you talked with whoever is financing the car for a temporary hardship payment. Just enough for some immediate relief while you assess what needs to be done.

Best of luck,
Andi

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25 Heather January 4, 2012 at 12:55 pm

I was in this situation at one point as well, kind of. I had a high-paying job and bought a very nice (barely used) Acura. I had no problem making the $500 monthly payment. My insurance was less than $100/month (love Allstate!) and I had no issues. But then my husband’s job forced us to relocate across the country. The company I worked for was not anywhere in the state we moved to, so I was forced to quit my job. The economy where I live now is awful and it took me 6 months to find a job making about 40% less gross than I was before. So we were really struggling to make those $500/month car payments, especially during the 6 months I was unemployed, but our emergency fund helped! Once I found a job, I was able to make those payments, but it was a struggle because my income was much less than it had been previously.

I recently refinanced my vehicle and shaved 2 points off my interest rate (3.39%) and $150. So now my payment is only $350/month and much better in line with our new lifestyle.

I know you said your credit is bad, but can you and your grandparents try to refinance? You might be able to save $30-$50 a month on the payment. For us, getting rid of the car wasn’t an option because we were upside down in the vehicle value and selling it to a private person meant we’d have to poney up the difference (which we didn’t have) and then find another car. We also looked at trading it in, but there again, I was underwater with the vehicle and trading it in meant adding on extra to the new vehicle loan.

So we sucked it up and made the $500/month payments for roughly 17 months after we moved, until I refinanced back in November. We only went out to eat once a month and were pretty much stuck at home for about a year. I’m happy with our $350 payments and I got to keep my luxury vehicle.

However, I have realized car payments are awful and we are keeping the Acura until it dies. It’s only 4 years old with less than 40k miles and is taken very well care of, so hopefully that means another 10+ years. I love having a nice car to drive around, but there is something to be said about not having a car payment every month. My husband has a 10 year old Cadillac that is paid off (thank GOD) and we’re both very happy about that.

If you can, take on a second job on Sundays and a couple nights a week. Sell stuff you have around the house. I’m going to start selling my Coach handbags that I no longer use. Even if I only get $50 for one, well, $50 is a tank of gas!

Best of luck!

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26 Heather January 4, 2012 at 12:56 pm

I sold my car to Carmax and simply haven’t gotten another car yet. I had a few thousand in equity and I used to that to pay off credit card debt. If public transportation is possible, swallow your pride and take advantage of it. It was a big lifestyle change for me, but 4 months later I am a much happier person with that debt off my shoulders.

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27 J. Money January 4, 2012 at 1:08 pm

THANK YOU EVERYONE!!! This is great!! You all spend so much time writing these up and sharing your thoughts with us, you’re so thoughtful!! THANK YOU!! I know for a fact the reader will appreciate this, and is reading ALL of them :)

THANK YOU so very very much.

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28 Ashley @ Money Talks January 4, 2012 at 2:23 pm

I’d seriously look into selling it. It’s hard to say without specifics but you probably owe about what it’s worth. 2 years in you should owe somewhere in the $11,000 area. KBB gives a 2009 Ford Fusion to be worth between $11,000 and $12,000. Of course there are a million factors that go into that of which I don’t know. So where the true numbers lie I can’t say, but it’s pretty close based on what I do know.

I would also talk to your grandparents. Tell them the situation. They don’t want a repo on their credit any more than you do. If you can’t sell it for what it’s worth maybe they will loan you the balance so you can be out from under the loan. It’s worth a conversation.

If you can’t sell it then you have to pay for it. Stick it out for a few more years and you will have a paid for car. An extra job would help relieve the pressure a bit. If you can pay extra you will have it paid off even sooner but it sounds like you will need some extra income for that.

Good luck! We’d love an update.

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29 Christa January 4, 2012 at 2:33 pm

I’d look at selling the car. Even if she doesn’t break even, getting rid of the high insurance costs would be helpful each month. However, that probably leaves her owing at least a few thousand on the car payment, and she’ll have to appeal to her grandparents for any kind of help.

If that option isn’t do-able, a second job sounds necessary. If she can make it to the summer, she could take on as many hours as possible in order to pay down the car and sell it.

Tough situation! I wish her the best!

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30 Gina January 4, 2012 at 2:36 pm

Ok, this. is. a. first… J. ….My comment was accused of being spammy??? WTH??

1.Get a student loan to pay off the difference? Depending on the balance of course.
2. Sell your virginity on Ebay?
3. Start a website Hugecarpaymentsarenotsexy.com
4. Sell blood, plasma, woman eggs (heard you can get up to 5000.00 for those!)
5. Nanny, babysit, other weekend jobs that paychecks go straight to paying off car note.
6. If you are a member of a credit union go talk to the bank president see if they can help you.
Spammy, why I nevah!! I am certainly NOT spammy!!

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31 J. Money January 4, 2012 at 2:50 pm

haha, sorry about that! it gets weird sometimes – you’re not the first today I’m afraid :(
HILARIOUS ideas though! Glad you tweaked and re-posted! :)

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32 Weirdo @ SoLongStatusQuo.com January 4, 2012 at 5:24 pm

First thing, is get them in touch with me! I work with a leading car insurance brokerage that shops 26 A and A+ rated companies all in about 15 minutes. If this guys can save back some money on his car insurance, that will help him out a lot, too! Shoot him my email addy and I’ll try to help him out.

weirdo@solongstatusquo.com

Weirdo

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33 The Happy Homeowner January 4, 2012 at 5:48 pm

I’d definitely look into ways to reduce the insurance tab as well as how to trim the budget elsewhere. And another income stream sounds like a definite regardless of the car situation.

As much as it may make sense to ditch the car at a loss, I’d say to try to stick it out because if she bails now, is she really learning from this experience? When I bought my first brand-new car, I made the hair-brain decision to do the first year no payment thing. When I realized how much more in interest I’d end up paying (couldn’t afford to pay more at the time; it was pre-Happy Homeowner time), I wanted to kick myself. But I stuck it out and each time I scraped to make the payment (never late, booyah!), I had a sincere reminder of how much I messed up. Never gonna happen again!

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34 Girl with the car January 4, 2012 at 6:12 pm

Oh, my. I just typed out a gigantic comment and then it gave me an error upon submission. I could cry right now, but I’ll just remember to copy and paste it next time and re-type it. :)

I had every intention of reading this post on my lunch break, but unfortunately work was chaos this Wednesday and prevented me from taking a potty break, much less using my lunch break to read. Thank the Lord for a job though! :)

First things first– thank you all SO incredibly much for taking the time to be so thoughtful and helpful! To see such kindness from strangers takes my breath away. I appreciate your help so very much!

For those who wanted more specific info:
Payoff amount (owed on car): $13,866
Purchase price: $18,000
Edmunds value projections as of today: Trade-in $11,314 Private Party Sale 13,240 Dealer Retail $14,890
Monthly take-home: Gross $2400 / Net $1700
Loan Term: 62 months
# of payments left: 42
Car Payment/month: $346
Insurance per month: $200

Debt: I don’t have much. I do however have the car loan, am an authorized user on my Dad’s (no ideas… he’s unemployed) credit card, and a few dings from the unemployment period. When you couple this with my short credit history, I can’t even get the “pre-approved” offers! No school debt yet.. just finished my 3 years at community college and will be transferring to University this March semester. It’s an accelerated quarterly program.

Budget: I do have one. I try to be very strict about it. For those who wonder where it all goes– a very small allowance (mostly emergency food & coffee on very long days), groceries, debt repayment (on a few small items from the unemployment days), phone bill, school, etc.

THANK YOU THANK YOU THANK YOU all again!! I appreciate this so much and will follow up as soon as I am able! I have a 7pm appointment so I can’t stay on the Internet (though I’d love to!) and I haven’t begun to process all of this! I will def. be thinking and praying and following up in the comments.

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35 WR January 4, 2012 at 9:29 pm

Gawd!
I was you 20 years ago.
Long story made short (I hope), I was driving my 1980 Mazda RX-7 down Rt. 1 when the electrical system decided to die. It was February and maybe 9 degrees outside. Across the way, like an oasis in the Sahara, was a Jeep dealership. I abandoned my bad luck and found warmth and comfort in the halls of Wrangler. 3 hours later I was on top of the world driving my new prize home. Part of me was amazed that they would sell me, a poor, dumb college student with no collateral, zero credit and (you know the rest) a $15,000 car. Into the spring and early summer I ‘loved’ that car. The payment was about $300.00 (Interest rate? what is that? I got 8% which sounded great at the time.). I could afford it, I thought. I was a waiter and occasional bartender and pulled in pretty good cash.
What I did not plan on were the incidental costs. Since I was a 19 year old male the insurance (for a Jeep) was almost equal to the payment. The taxes for a new car in Virginia were horrendous. Jeeps, especially then, were not exactly gas sippers so the fuel cost for my ‘sweet ride’ was painful. Before long my sweet ride became an albatross. I hated it. I was picking up shifts just to pay my car loan and insurance. I got a speeding ticket and it all came to a crashing end. When a 19 year old with a jeep gets a speeding ticket the insurance industry stands erect and says ‘RISK!” and they are probably right. I know that if my 19 year old self came up to me now and asked for the keys I would be horrified.

The bottom line is that you need to look at this as one of the great financial lessons of your life. The two major costs in life for most Americans will be housing and transportation. A home, even now with all the mortgage hullabaloo, is a great investment. A car, however, is a utility. You need to start thinking of a car as a driving appliance and approach vehicle ownership with a new set of eyes. The first lesson, if I may paraphrase Thomas J Stanley (author of The Millionaire Next Door and Stop Acting Rich) is this: Nobody cares what we drive! Trying to look successful to our peers is a slippery slope and we kill our chances of true financial freedom every time we posture with loans we should never commit to. Debt is self imposed slavery. We must do everything in our power to stay out of debt.

Right now there is no easy way out of your predicament and that is the good news. Let the pain of this experience drive you to always be frugal, to save money and pay cash for all of your future vehicles and stuff. If you do this you will be on your way to achieving real financial independence.

Next time, get a copy of Consumer Reports and find the most reliable car you can in your price range, go on craigslist, cars.com, etc and find it.

Since transportation expense is second only to housing, everyone should be an expert car shopper.

Best of luck to you!

-WR

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36 Amanda Bee January 4, 2012 at 10:29 pm

First, take a deep breath and don’t feel so bad. Lots of us have done something similar. I took out a personal unsecured loan to pay for half of my Civic, because it was too old and cheap to get a regular car loan. The payment is relatively cheap but my interest is sky-high and I’m still paying it off. We all make mistakes.

If you can sell it and take a loss, then get a much cheaper vehicle, that might be an option. That’s assuming you have the money to make up the difference between what you owe and what you sell it for (assuming you’re upside down on the loan). And then either have the money to get a cheaper vehicle, or can use the money you save you rent a cheap place within walking/biking/bus distance of work and school.

Otherwise, getting another job for the time being to pay down the debt and build up savings sounds like the best option. You can always pay on the car just until you aren’t underwater on the loan anymore, then sell it. Also, shop around for cut rate insurance. No, a major cheapy company won’t provide you with perfect coverage, but if it can save you the money you desperately need right now then I would say that’s worth it. You could also try to cut back in other areas- money you spend going out, buying personal care items, cell phone bills (get a cheap phone with no data plan, or get on a family plan with your grandparents). All of that can add up over time.

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37 Amanda Bee January 4, 2012 at 10:31 pm

Also, Carmax will buy your car outright, even if other dealers won’t. I would go in there to figure out what they’ll offer you for the car. It will *probably* be less than you owe (it normally is in this situation) but at least then you’ll know where you stand. And take really good care of the car while you can, both interior and exterior. It’ll pay off if you decide to sell it.

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38 nichelle January 5, 2012 at 8:44 am

I’m sort of surprised no one mentioned this…I’m sure your parents, or grandparents have car insurance so why not try to be put on their policy it should be cheaper. It is for me at least. If you are a full time student, with financial aid getting a second job may not be an option….I take sixteeen credit hours, work 12 hours a week and that is just stressful sometimes….twelve is the max I can get with my job. However, summer is soon around the corner…and some summer jobs pay a bunch of money. I plan on working at cedar point. You can make close to six thousand over the summer. Living on premises is one fifty a month, plus your food. You can walk to work so you wouldn’t even need your car, thus saving on gas! I would suggest looking for a higher paying summer job six thousand over two and a half three months is more thank your making right now, expenses are cut too. There are plenty of summer jobs like this out there you just have to look. Also if your collehe has a student money management service check them out they may be able to help you

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39 J. Money January 5, 2012 at 12:25 pm

You guys are awesome!!! Thank you, again, for spending so much time and effort sharing your advice!! SO HELPFUL!!!

(And if you hadn’t seen it, our reader friend left more details above in comment #34 – “Girl with the car.” As you can see, she’s very appreciative!)

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40 LJ January 5, 2012 at 4:35 pm

Just a quick note, when you go to sell the car, take a few hours beforehand and wash it, empty the inside out ENTIRELY, and vaccum carpets, wash windows, etc. I have learned over the years that dealers/people are much more interested (just like with houses) in a clean, “i can see this as my car/i can turn this car over” type situation, rather than a dirty messy car. Hope this helps!

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41 J. Money January 5, 2012 at 6:32 pm

YES!! AGREED! I once worked at a car auction of totaled cars (as in, cars that were all kinds of smashed up and nasty) and my job was to wash and clean out as much as I could of each car. Even though they were totaled. Why? Because they found out they got about 20-25% MORE at auction when it as cleaner. Pretty crazy stuff, and I happily did it for $25 a car ;)

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42 Kathy January 6, 2012 at 12:53 pm

Since I work in the insurance industry…here’s a few tips/ideas.

In lieu of selling the car (since you need it to commute), try talking to your insurance company about your premium. There could possibly be discounts that are not being given; ie; multi car, multi line, etc. Also look into possibly increasing your deductible(s). However, do not increase them to where you are not comfortable if you were to have a claim and would need to pay said deductible.
If you are insured at the same company that your grandparents are, then a multi-car discount should apply.
If not, check into getting Renters Insurance because the multi-line discount savings might be much more than the cost of the auto insurance alone.

Good luck to you & let us all know what you decide to do.

Kathy

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43 Melissa January 9, 2012 at 10:56 pm

My advice, and this is only the advice I’m giving because she’s so young and presumably will be on better financial standing in a couple of years, is to ask for help. It will suck, but if going to your parents or grandparents and asking for some monetary help is an option, I would do it. Maybe one of them can loan you the money to pay off the car, or pay off enough of it to lower your monthly payment, and then you can agree to start paying them back (with interest!) in a year or two, when you’re in a better position. It’ll take a bit of the heat off.

I know it’s not the best advice, but this reader is young enough and seems to really understand that she made a mistake, so there’s no sense in continuing to punish herself. It may not be possible to get a second job or a better paying job (since we don’t have details of her industry), and trading in the car for a cheaper one probably doesn’t make good financial sense, since she’ll be taking the loss. I’d say, just suck it up, admit you made a mistake, and ask for some help. Everyone should be allowed a bail-out once in their lives. :)

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44 Natalie @ Mango January 12, 2012 at 10:18 am

J. Money, just saw this post and decided I simply have to share a video with you guys. Everyone makes regretful decisions with their money sometimes, be it a car you can’t afford, a purse worth more than that car, a bad investment… but the point is, we can learn from them, and hopefully one day even laugh about them.So at Mango we made this video: Money Confessions of 2011!!!!! (dun, dun, dun…) What money confessions do YOU have from 2011? http://www.mangomoney.com/blog/mango-money/money-confessions-of-2011

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45 nonegiven January 24, 2012 at 4:19 pm

It occured to me if the grandparents have an older paid off car, would they be willing to trade titles and take over the payments?

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46 Kaitlyn April 13, 2012 at 9:35 am

So of all the crazy ways to get out of my car payment I chose….

… hitting a semi-truck on the expressway. Way to be dramatic, huh?

Long story short: a semi truck’s trailer swung into my lane, when I veered to miss it my car spun out of control, hit the truck a few times, and spun down a hill. Somehow I made it out a-ok, praise the Lord.

Thankfully the insurance company paid my loan off IN FULL (thank you God!!) & now I’m back at square 0 looking for a new (used!) much more economical car.

God is good! Thank you all for your advice.

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47 J. Money April 13, 2012 at 10:25 am

Wowwww you are certainly blessed! So glad you’re nice and healthy still – my word. Always a pleasure hearing from you my dear, have a great weekend! :)

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