Vehicle debt

[Dfoster]

Short version, I bought my truck last fall...about a month or two later is when my wife and I started budgeting and trying to rid debt instead of building more. That said, it was pretty immediate that we realized what a poor decision it was to buy the truck. Ego aside, it's time to get rid of this, but I don't know how without losing thousands? My first thought was to trade it in, roll over the extra I owe into a new, smaller loan? My reasoning is that I'd rather be upside down on a $10k loan versus a $20k. In all seriousness though I'm not sure if there's something I could do or if my best option is to bite the bullet until the loan isn't upside down anymore then sell it?

[Jluke]

Do you need the truck so you can do "truck" things? Hauling, etc

What are the loan terms?

Original loan amount
Current loan amount
Interest rate
Length of original loan
Time remaining on the loan
Monthly payment

What percent of your net income is the monthly payment?

[disneysteve]

Welcome to the site.

How much is the truck worth?
How much do you owe?

Do you have any liquid savings?

[Dfoster]

Thanks for the replies. My monthly payment is 368, total left on the loan is 20,358 and if I recall the interest is 6%. I checked kbb and nada and looks like the truck retails around 19k, and trade in is 16ish. Not much in the way of liquid savings, about 2000 right now

[james.hendrickson]

DFoster - welcome to the forums.

Do you have any high-interest credit card debt? The car loan is one thing, but what does the rest of your financial picture look like?

[TexasHusker]

Don't trade it in. You'll get completely hosed.

I would keep it. It will provide solid transportation for many years, and while vehicles are horrid investments, trucks actually retain their value very well, except Dodge/Chrysler products.

If you sell it, you're not going to get much more than trade in value from a private party. A dealership buys most used cars SIGNIFICANTLY below what all those books say is trade-in value. Dealerships don't use those books - they are trying to steal cars and generally won't buy one from a customer unless they can absolutely clean your clock. The insider term in the car business is "I took his head off." Or "I got a scalp".

[Jluke]

Thanks for the details

The monthly payment isn't too high for a new truck. Although I'll guess you went 72 months.

Interest rate should be lower. Have you looked at other loan options?

Keep the truck

[disneysteve]

Do you need the truck so you can do "truck" things?

I think the answer to this question is really critical to the decision.

If you bought a truck as an expensive toy and your goal is to get out of debt and a regular car will meet your needs, then sell the truck (sell, not trade in). Search online to see what they're actually going for, not just what kbb says they're worth. If you can sell it for within a couple thousand of what you owe, I say get rid of it.

[TexasHusker]

I think the answer to this question is really critical to the decision.

If you bought a truck as an expensive toy and your goal is to get out of debt and a regular car will meet your needs, then sell the truck (sell, not trade in). Search online to see what they're actually going for, not just what kbb says they're worth. If you can sell it for within a couple thousand of what you owe, I say get rid of it.

Sell the truck and you're $2000 in the hole with zero transportation. It will take $5K to buy a decent beater. That's $7000, and you've still got a car with few good years left.

[TexasHusker]

Post year make model miles condition and I can tell you within $200 what the vehicle is worth.

[disneysteve]

Sell the truck and you're $2000 in the hole with zero transportation. It will take $5K to buy a decent beater. That's $7000, and you've still got a car with few good years left.

Exactly. So that puts him $7,000 in debt instead of his current $20,000 in debt. And that's only if he can't come up with the $2,000. He can cover at least part of that from savings so maybe only $6,000 in debt.

[TexasHusker]

Exactly. So that puts him $7,000 in debt instead of his current $20,000 in debt. And that's only if he can't come up with the $2,000. He can cover at least part of that from savings so maybe only $6,000 in debt.

But in 3 years he needs yet another car.

Sorry, but in this case, the alternative isn't particularly compelling.

If he had a typical $30-35K high end car or SUV, I'd be on board with down trading. Not much upside on this one.

If he can come up with $7K for his loss and a beater, he can also knock down his principle to $13K, with a vehicle that might well last 15-20 years, has a warranty, etc.

I like the beater principle in many cases. This one not so much.

[scfr]

Is the truck the only vehicle that your household owns, or do you have another? If your household owns another vehicle, is it feasible for you and your wife to sell one of the vehicles and share one vehicle? Please note that I am not asking if it would be convenient or easy for you and your wife to share one vehicle, I'm asking if it is feasible.

[disneysteve]

If he can come up with $7K for his loss and a beater, he can also knock down his principle to $13K

I wasn't thinking he would come up with the 7K. I was thinking he'd have to borrow the 5K for the new car.

It's true that he will need another car in a few years but hopefully by then they will have paid off their debt and be better positioned to buy one, even if it's another 5K one.

I agree with you that this truck will lost a long time, though. Of course, replacing the brand new truck with an older car will also lower his gas and insurance costs too for added savings.

I don't think there's a "right" answer here. You just need to decide what the goal is. If the goal is getting debt-free, replacing the truck will get you there a lot faster.

[TexasHusker]

I wasn't thinking he would come up with the 7K. I was thinking he'd have to borrow the 5K for the new car.

It's true that he will need another car in a few years but hopefully by then they will have paid off their debt and be better positioned to buy one, even if it's another 5K one.

I agree with you that this truck will lost a long time, though. Of course, replacing the brand new truck with an older car will also lower his gas and insurance costs too for added savings.

I don't think there's a "right" answer here. You just need to decide what the goal is. If the goal is getting debt-free, replacing the truck will get you there a lot faster.

Agreed