Getting rid of an auto loan?

[Langlo Family]

Hey guys,

A little over 2 years ago, I purchased a truck and financed almost all of it. To make matters worse, we traded in another car that we owed money on and it made the truck cost more than it was worth. I still owe more than it's worth. I purchased it because my job was about a 15 min drive away. Since then, my job has relocated to right next to our house. I'm really only driving my truck 4 miles a day now. Since it's about a 15 min walk, and with rising gas prices (the lowest here is $4.69), I've decided to start walking to work. We also plan on moving across country within the next 1-2 years so needless to say, this truck is a waste now.

I have searched and tried to see my options about getting out of the loan, but it doesn't look like there is much hope. I could sell it for what it's worth now and eat the extra $4,000. Although I wouldn't like to do that. But even without paying gas/insurance/maintanence I would be saving around $200/month.

I know it's not the greatest situation to be in, but it's not a matter of affording it. I can definitely afford it, I just don't want to. If anyone has any ideas or tips, please let me know.

[disneysteve]

Do you actually owe more on the truck than it is worth, or is it that what you owe on the truck plus what you still owe on the previous car adds up to more than the truck is worth? If it is the latter, I'd sell the truck and just pull from savings to pay off the difference that got rolled into the loan from the other car (assuming you have the funds to do that).

In the meantime, since you are hardly driving it, gas and maintenance costs are minimal. Have you looked into reducing the insurance coverage? Call your agent. They may be able to cut your rate when you explain how little you drive the vehicle.

[project15]

If you absolutely do not need this truck, sell it and eat the cost for now and buy a cheaper smaller used car (honda civic type of car) in 2 years when you move and may need another car.

Here's your options laid out with hypothetical numbers

Option 1 - Keep the truck for 4 more years until paid off:
Continue paying $400 per month (400 x 12 x 4 = -$19,200)
Pay Insurance, Maint, Gas ($200 x 12 x 4 = -$9,600)
Total cost of truck for 4 years = -$28,800

Option 2 - Sell truck right now and don't buy another car for 4 years:
Payment = -$4,000
Insurance, Maint, Gas = 0
Total Cost = -$4,000

Option 3 - Sell truck right now, buy another small car in 2 years for $10,000:
Payment = -$4,000
Insurance, Maint, Gas for 2 years ($200 x 12 x 2 = -$4,800)
Small car purchase = -$10,000
Total Cost = -$18,800

As you can see, at the end of 4 years, you end up with a paid off vehicle in option 1 and 3. Ideally, you would want to put off the purchase of the car as long as possible so that you would continue to save on the other items (insurance, maint, gas, car payment). For those 2 years without a car, you could even rent a car a couple times a year (add $500-$1000 to that 18,800) and still come out ahead.

[maat55]

If you absolutely do not need this truck, sell it and eat the cost for now and buy a cheaper smaller used car (honda civic type of car) in 2 years when you move and may need another car.

Here's your options laid out with hypothetical numbers

Option 1 - Keep the truck for 4 more years until paid off:
Continue paying $400 per month (400 x 12 x 4 = -$19,200)
Pay Insurance, Maint, Gas ($200 x 12 x 4 = -$9,600)
Total cost of truck for 4 years = -$28,800

Option 2 - Sell truck right now and don't buy another car for 4 years:
Payment = -$4,000
Insurance, Maint, Gas = 0
Total Cost = -$4,000

Option 3 - Sell truck right now, buy another small car in 2 years for $10,000:
Payment = -$4,000
Insurance, Maint, Gas for 2 years ($200 x 12 x 2 = -$4,800)
Small car purchase = -$10,000
Total Cost = -$18,800

As you can see, at the end of 4 years, you end up with a paid off vehicle in option 1 and 3. Ideally, you would want to put off the purchase of the car as long as possible so that you would continue to save on the other items (insurance, maint, gas, car payment). For those 2 years without a car, you could even rent a car a couple times a year (add $500-$1000 to that 18,800) and still come out ahead.

Well done.

[Langlo Family]

Thanks guys for all your help. I will probably be going with project15's option #3.

[Johansen8]

I am sure there is no easy answer, car loans are tough.
One suggestion though would be if you do own a home to see if you have enough equity in the house to get a home equity loan. The home equity loan will be at a lower finance rate than the car loan and you may be able to consolidate other bills at the same time, making it one lower monthly payment,
Remember, car payments are the instruments of the poor to keep them poor. Rich people don't have car payments, that is part of the reason why they are rich.

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[melissa15531]

Don't feel so bad I have 2 truck loans. One is an 08 chevy silverado at $463.01 for 72 months. I bought that in april of 08 at 2.9%. Then my husband who works for the state of PA bought an 08 Ford F150 in September for $457.63 for 72 months at 8.4%. Want to talk about loan hell. Now he might be getting laid off. We've been trying to sell his truck but when you owe $24,000 on it no one wants it.