Is this a stupid idea?

[channah]

Okay, so I am really trying to get my Debt under control (as posted earlier in the week). I am currently paying 370 a month for my jeep wrangler at 12.9%.(for about 6 months now) Here is the problem (besides the interest rate), I owe about 5K more than what my jeep is worth according to blue book value(because of previous vehicle carry over). I am looking to save money on my traveling expenses, and better gas mileage would certaily be a big factor. I have come up with the idea of buying like a new Hyundai Elantra (or something comparible). Now, I would end up paying more like 18K for a 13.5K vehicle, and my payments would probably be the same, or at least close, but I figure I would save between 150 and 200 a month on gas and insurance. I also believe I could get a better interest rate because I got 12.9 due to the fact that the jeep was 6 years old. Is this a stupid idea? Do you think it is even possible?

[Fern]

How do you figure you'll save between $150 and $200 a month on gas and insurance? How much driving do you do monthly? And how could you insure a new vehicle for less than an older one? Then you have the added cost of new registration and plate fees too.

I don't have much experience with loans, but why couldn't you take out a home equity loan at a much lower rate and use that $ to pay off the jeep wrangler at the much higher rate?

I don't think taking on $18K of new debt is a good idea.

[jmjj215]

I think Jeeps are inherently more expensive to insure.

Why not get a 5k vehicle (or less, my 98 prizm is going strong and I got it for $3800) and have even smaller payments?

[BAGAGT1]

From a previous post, I can tell you Channah drives 95 miles a day, and does not own a home. See post http://savingadvice.com/forums/showthread.php?t=9489

[cercis]

Saturns are one of the cheapest cars to insure. They also tend to get really good gas mileage (my 1998 was getting 30+ until I switched to full city only driving).

You can get a good used Saturn for a decent price and save on insurance and gas.

You should call around to your insurance agent and go over several different cars and get quotes for them. Start with a new car you like, go to a used version of that car and then ask the agent what cars they recommend for saving on costs.

Then, sit down with the mileage rates for different cars (for this, go with the estimated mileage for your Jeep, not necessarily your actual rate) and figure out savings there.

In insurance and in fuel costs. Also, call around to maintenance facilities and see what regular maintenance will cost for each vehicle. And price tires. Figure to have to replace them every 50k miles (so at 95 miles/day, every 1.5-2 years, depending on how much you drive during the week)

At the end of all this, look to see what you think you can save. If you can save some money, then it might be worth it. Plus, if you can continue to pay what you currently pay in all these things - but put it toward paying off the vehicle early, then you could come out way ahead. Most vehicle loans are "simple interest" and the interest is added every day. So if you pay early, you will pay less in interest. By contrast, most mortgages figure interest on a monthly basis, so as long as you get it in by your due date, you pay the same amount in interest.

[channah]

I will certainly look into all of this, but here is my dilemma. Please tell me what you think...I have about 6000 in inequity on the jeep, and I don't have that to fork out to gain equity on the jeep. I contacted a dealer about a used hyundai, and he said that I can't roll that much inequity on a used vehicle. Is that true?

[niki_the_tiger]

Be careful what kind of car you buy, as well. You don't want to be spending a lot of money on repairs... especially if you are buying a used car. Toyotas keep their value and are very reliable.

[BCompDude]

Originally Posted by jmjj215

I think Jeeps are inherently more expensive to insure.

Why not get a 5k vehicle (or less, my 98 prizm is going strong and I got it for $3800) and have even smaller payments?

Exactly, I think the original poster's priorities are way messed up. You need to get out of this debt that you got yourself into--not just transfer it around and probably end up costing you more money. You say you owe 6k more than the car is worth, so you are "underwater" on this loan, that is super bad--but all too common.

I want (everyone here does) to help you out. But that is difficult w/o more facts, such as, how much gas do you use in an average month (gallons), what the cost of insurance is on your Jeep versus this other car (hint: call your insurance agent and ask specifically for a quote--then go to progressive.com and see if you can get a better rate elsewhere). What your credit rating is would help too. How long the term of the loan is would help as well.

That said, I will offer up my advice on what I would personally do if I were in your situation w/o knowing all of the facts I'd like to.

Step 1: Cease driving ANYWHERE I didn't need to, see if I could carpool (I hate carpooling but you need to see if you can), drive more efficiently if I wasn't (drive 60 mph on the freeway and don't mosh on the pedal)--all of that saves you gas money.

Step 2: REFINANCE, that rate is absolutely HORRIBLE. Capitalone.com offers used car rates at 5.99-8.39%. This will save you UBER money--do it like. . .now.

Step 2.5: Check out insurance rates from other companies, if you don't have time just go to progressive.com for their rates and others in one easy click. Switch to the lowest. Also make sure your deductible is either 500-1000, you don't need less and since you have to purchase full insurance it should save a hefty amount on your premiums.

Step 3: I would cut nearly all discresionary purchases to zippo--thats right, no movies, cut cable if you have no contract, no new clothes, no new computers, video games, cds, dvds etc. If you absolutely NEED your cable (and you don't) fine but no new purchases or contracts of any type. Place all of that money into repaying that loan you have refinanced.

Step 4: In six months (or less depending on how much you put into the loan etc) check out the discrepency between the value of your car and how much you owe. Once you find out that it is equal or a little above or below, SELL that thing immediately, even if its for a slight loss.

Step 5: Buy something more reasonable like a USED car that costs under 5k. Save the "car payment" that you used to make and the discrepencies between insurance costs and gas into an emergency fund if you do not have it (3-6 months of LIVING expenses, not paycheck amounts). If you have one/after that is accomplished, put that money into a fund for purchasing a new car if you'd like (or save it for something else like a house etc) and when your next car/whatever else purchase comes around, you can simply hand over a stack of 100's. Priceless.

[channah]

It was only an idea to try to figure something out. A bad one obviously. Here is more info on my situation...
1. My commute to work and back is 90 miles per day. I also am a musician on the weekends, so the traveling varies. At least 200 on a weekend I would say. So that is about 650 miles per week on average. I get about 300 miles from my 19 gallon tank. So I use roughly 2 tanks a week at 45 per fill up. That equals out to about 360 per month, plus another 50 or so for tolls.
My insurance is 1100 per year. That is inexpensive for a 27 year old male in New Jersey. I will be seeking prices for when I move officially to DE. My payment is 370, so per month I am spending almost 900 to drive. The reason I can't refinance (which I have tried several times) is that fact that my jeep is a 99 and I have too much inequity.(because I was a moron and bought the extended warranty on the jeep and the truck before it)
You may ask why I am commuting so far? I am moving with my fiance next month. The mortgage on her Condo is only what pay for rent at my apartment, plus she has a roomate. I will be rent free for about 6 months or so, so that will give me an opportunity to build a savings account, and pay off a good chunk of my credit cards. I will eventually be putting my name on the mortgage, so refinancing the condo to pay off my 22000 loan may be an option in the future. I haven't done that before, so I'm not really sure how it would work out to refinance like that.
My credit score ranges between 650 and 660, as of last week. I have never been late on a payment, but my income to debt ratio is too high. I had consolidated all my credit and loans into one loan, which it's rate is 14.9. I have never been late on payment and am determined to get a grasp on my situation.