Big car dept

[J-Money]

hello! first time to post to this site and I am a recent DR convert. Since I began listening to DR in early January of this year, I have gone into over-drive in paying off small stuff that has been lingering for too long - student loan, 2 credit cards, orthodontics, etc. Fortunately between my husband and I we make a good income so I should have all the small stuff paid off by end of Feb. The next big thing to tackle would be the car notes.

We have 3 car notes totalling $85K - 2 of which are at 0% interest and one we will soon be converting from a lease to a purchase (per DR advice). After hearing what DR has to say about debt and car loans, I am horrified to find myself with this much car debt. BEFORE DR I didn't think it was such a terrible thing as long as I could afford the payments + insurance comfortably...and we can. But now I realize this is a giant amount of debt and I'm unsure if I should:

1) snowball all of that and have all 3 cars paid off in 2 yesr (adding $2000K per month and then snowballing the rest)...and never buy a new car again

or

2) try to sell -- this one might be difficult since they are newer and are probalby upside down.

Advice? I am so torn on what to do...? It was our intention when we bought 2 of the cars to pay them off & keep them (not the lease of course).

[J-Money]

Big car debt...not department LOL :-)

[disneysteve]

How many drivers? If it is just you and your husband, you don't need 3 vehicles so I would definitely sell at least one of them.

List the 3 loans for us with the balance due, the interest rate, the monthly payment and the current resale value of the vehicle (see kbb.com for that). Also, what is the household income? 85K in car loans is a heck of a lot of money.

[bjl584]

That's a lot of auto loan debt. List out the details of the loans so we can have a better look at your situation.

[Fizgig]

Since you are a DR fan, I will repeat his advice:

1) The total value of ALL your vehicles (kelly blue book), should be less than half your annual income.

2) If you can pay off all your debt within two years, including the car debt, you may consider keeping your vehicles if you like them. If it will take longer, you should sell one or more and get a cheaper vehicle if you need it.

[maat55]

I would likely down grade my auto debt and buy cars I can afford to pay cash or borrow for while paying off any upside down debt within one year. After this, I would start a reasonable car fund that can replace autos systematically.

With 85k in auto debt, you should be able to downgrade enough to get out of auto debt within a year if you are able to get out of debt in two years now.

[whey2big4u]

Well 85K is a lot for 3 cars!! Even with 0% interest. I thought 5K was a lot

Do you need all three?

I would sell two of them if you can, even if it is going to be at a loss. Once you drive off the lot you lose %20 (I think) of the cars value. This would at least put money towards the debt and the rest would be A Lot less and easier to handle.

[littleroc02us]

1) snowball all of that and have all 3 cars paid off in 2 yesr (adding $2000K per month and then snowballing the rest)...and never buy a new car again

or

2) try to sell -- this one might be difficult since they are newer and are probalby upside down.

Advice? I am so torn on what to do...? It was our intention when we bought 2 of the cars to pay them off & keep them (not the lease of course).

I've been a DR fan for 6 years and actually he would want you to sell the cars unless there is a years left payment on them. He would tell you that you shouldn't have more than 50% of your yearly income in toys. If he told you to buy the lease when it's over than I would do that. But to keep 3 cars in insane. I would sell all of them and buy cheap used ones. As for never buying a new car, DR says that when you are a millionaire and can pay cash for a new car then do so.