Car

[MonaroGM]

Hello my name is Lance Herner I currently own a 2005 Pontiac GTO with 50,000 Miles on it. I owe about $18,000 on the vehicle and I have $13,000 saved in the bank. My Car payment is 387$ and my Insurance is $290 a month. I have goals in buying a house in the near future and my paychecks are about 1300-1500 every other week and I currently live at home with no other significant bills. My quest is when i save the amount needed to pay my car off should I drain my savings?? Or should i keep making payments and use the money im saving now for my house?? What is the smartest thing to do?

[disneysteve]

Hello my name is Lance Herner I currently own a 2005 Pontiac GTO with 50,000 Miles on it. I owe about $18,000 on the vehicle and I have $13,000 saved in the bank. My Car payment is 387$ and my Insurance is $290 a month. I have goals in buying a house in the near future and my paychecks are about 1300-1500 every other week and I currently live at home with no other significant bills. My quest is when i save the amount needed to pay my car off should I drain my savings?? Or should i keep making payments and use the money im saving now for my house?? What is the smartest thing to do?

Let's say you average $1,400 income ever 2 weeks. That's just over $3,000/month.
Your car payment is $387 which is 12.8% of income. Rule of thumb is not to exceed 10% so the car is a bit of a stretch for you. I'm also curious how long the loan is for (especially since you owe such a large amount on a 10-year-old car).

What's the smartest thing to do? I vote for selling the car. How much is it worth? I checked kbb.com and got a figure in the $15,000 range but I don't know the details of your vehicle (options, condition, etc.). Hopefully you aren't actually thousands of dollars upside down on a car that old (how could that even happen?).

So again, I'd sell the car and buy something more affordable like in the 5-10K range. And no, you shouldn't drain your savings to pay off the car.

[MonaroGM]

Let's say you average $1,400 income ever 2 weeks. That's just over $3,000/month.
Your car payment is $387 which is 12.8% of income. Rule of thumb is not to exceed 10% so the car is a bit of a stretch for you. I'm also curious how long the loan is for (especially since you owe such a large amount on a 10-year-old car).

What's the smartest thing to do? I vote for selling the car. How much is it worth? I checked kbb.com and got a figure in the $15,000 range but I don't know the details of your vehicle (options, condition, etc.). Hopefully you aren't actually thousands of dollars upside down on a car that old (how could that even happen?).

So again, I'd sell the car and buy something more affordable like in the 5-10K range. And no, you shouldn't drain your savings to pay off the car.

If you go on Auto Trader you will not find a GTO with my mileage for less than $18,000 Dollars.. plus mine has a Sports Appearance Package wich was a +$5000 dollars on top of MSRP in 2005 Very hard to find and it is not in production any more. The loan was a 6 year loan wich the $18,000 includes GAP Insurance (dont remember how much extra it was) and a 30,000 miles 3 year Aftermarket Warranty wich added about a $1,100 (wich already paid for itself). I can most definatley get 18,000 for the car is i choose to sell wich i wont. I could perhaps put a few grand down and refinance it?

[Permanent Temp]

Whats the near future? You will need a down payment and an emergency fund in order to get a house. How much house are you looking for? You can post here so we can help you figure out how much you can afford or use an online calculator. Right now you are spending $677 a month on a car not counting maintenance that is a lot of money.

If you are hell bent on keeping the car pay if off before getting a house. Then save up for house and maybe you should save for the next car to make sure to you don't need to get a new car loan.

What are your other expenses? Do you have other debt such as student loans or credit cards? We'd need to know a bit more about your situation to help advise you. A house is not just about the payment there a ton more expenses involved.

[ua_guy]

Don't touch your savings.
Start aggressively paying off the car.
Move out of your parents' place first, and rent something, learn to live on your own. Wait to buy a house until the mate of your dreams comes along.
Meanwhile, start making career leaps and save more and more money, really nail down what you want to do, and don't be afraid to change course if it's not working. Keep the GTO until it can't be driven anymore.

Being smart with money isn't about having the loftiest aspirations or being able to take on as much debt as your income can afford, while still paying everything on time and having good interest rates. Don't be that guy. You're over-extended on an impractical car (a fun one, which is fine, but you owe way too much). For reference, I was looking at buying an '04 GTO back in 2006. Light blue, black interior, 5.7/ 6-speed, just over 5k miles. Still smelled brand new. They were asking $18,500.

Good luck!

[disneysteve]

Your car payment is $387 which is 12.8% of income. Rule of thumb is not to exceed 10%

You're over-extended on an impractical car (a fun one, which is fine, but you owe way too much).

The loan was a 6 year loan

Again, rule of thumb for buying a car is to get a payment of no more than 10% of your monthly income for no longer than 3 years. You couldn't even get to 10% despite taking a 6-year loan. You can't afford this car. I'll stand by my original answer: sell the car. Buy something that actually fits your budget. Then you can start working on saving for other goals like a house.

As for buying a house, you need to have at least a 6-month emergency fund and a 20% down payment before you buy. Home purchase shouldn't exceed 2.5 to 3 times annual income, the lower the better of course.

[bjl584]

Hello my name is Lance Herner I currently own a 2005 Pontiac GTO with 50,000 Miles on it. I owe about $18,000 on the vehicle and I have $13,000 saved in the bank. My Car payment is 387$ and my Insurance is $290 a month. I have goals in buying a house in the near future and my paychecks are about 1300-1500 every other week and I currently live at home with no other significant bills. My quest is when i save the amount needed to pay my car off should I drain my savings?? Or should i keep making payments and use the money im saving now for my house?? What is the smartest thing to do?

The smartest thing to do is to sell the car. It's a toy and it's totally impractical. Not that there is anything wrong with that, IF you can afford it. You can't. And, if you ever hope to have a house you will need to sell it and get something more practical.

[Bob B.]

Gosh, why don't you go back and read the thread you started last December. Were you really expecting a different answer?

[disneysteve]

Gosh, why don't you go back and read the thread you started last December. Were you really expecting a different answer?

Great catch! LOL. Yes OP, our advice isn't going to change unless your situation changes. For example, if you got a great new job and doubled your income, my recommendation for what to do with the car might change, but otherwise we're all going to give the same advice you got in December. You still can't afford it.

[autoxer]

When getting your own house becomes more important than driving a GTO, you'll know what to do.

[Eagle]

When getting your own house becomes more important than driving a GTO, you'll know what to do.

+1 to this.

[Eagle]

Hello my name is Lance Herner I currently own a 2005 Pontiac GTO with 50,000 Miles on it. I owe about $18,000 on the vehicle and I have $13,000 saved in the bank. My Car payment is 387$ and my Insurance is $290 a month. I have goals in buying a house in the near future and my paychecks are about 1300-1500 every other week and I currently live at home with no other significant bills. My quest is when i save the amount needed to pay my car off should I drain my savings?? Or should i keep making payments and use the money im saving now for my house?? What is the smartest thing to do?

@ MonaroGM
It's about priorities. Sounds like this is a "toy" instead of means of transportation. A very expensive toy considering you are paying 8% interest from your first thread in Dec 2013. Cars are not investment assets. They are depreciating asset. Meaning you will likely never make more money on a car than you put into it.

At 23 or 24 and living at home what does your budget look like? Share that with us so we can help you knock out or lower your expenses. I'd venture to say you're paying too much for a cell phone. And also a guess is you probably spend way too much on entertainment (video games?). Just spit balling here.

You say you're able to save $800 a month. I think the time is now for you to put that $800 a month towards paying off your car. 13k is plenty to hold onto for now. In fact if it were me I'd probably take 10k and put it towards the loan. I'd keep 3k in the bank. Then pay off the rest by December 2014 (800 x 4 = $3200).

If you want to get serious about paying this loan off and buying a house without mutilating your savings you need to either increase your income or decrease your expenses. Preferably both.

[Permanent Temp]

"4. Im going to start using the 800 dollars a month i save towards making car payments and im going to take the 2 grand i get during incometax and put that down on the car as well... does that sound like a good idea?? Then when i owe what its worth ill refinance it.. I thank you all for your input i know i may have made a mistake but im learning as i go and i wont make the same mistake twice.. young a dumb ??"

If you had done this in December you would have eaten through that 5K you were over on the loan. It sounds like right now your dipping your toe into what you would like to do next. Right now you have the car so you need to pay it off or sell it. And in order to have a house you need down payment and an emergency fund. There is no other magical solution to this. It is dollars and cents.

In December of last year I had 5K left on my 10% car loan and about two years left on the loan. I put as much money on it as possible to pay it down before my main job ended so I am car loan free. My goal is to get a house someday too but I already have a 6 month emergency fund. And I know I can't get a house due to my job situation and about as much in student loans as you do on your GTO car loan. If you want to keep the car you need to aggressively pay it off now. The car payments are going to hold you back from that goal for sure.

You need to map out a viable plan for getting a house if that is what you want to do. Your even still pretty young you could entertain maybe a tiny house to get out of your parents house for now if you so desire. But you need to get a feel for what it actually costs to live because right now you are not getting the whole picture. Are your parents in a house or an apartment. Can you talk to them about housing costs so you can get a feel for what your in for if you went out to live on your own and what you would have to change about your lifestyle in order to afford it.