Question: Buy Used Car or Pay off small Mortgage?

[RaznKingsKidz]

We have been debt free (everything except mortgage) for over 12 years. We went through the Dave Ramsey Financial Peace University Classes at our church last year and have been fans of his for years. However, we did our debt free thing with common sense of not spending more than we made nor buying things we could not afford and have always hated borrowing. Wish we had learned Dave's principals many years ago! Anyone, we are a one income family and it's not a big income by any means. So, if we can do it, ANYONE can!! It's basically a mindset/paradigm shift!
So, my question at the moment......... We have one vehicle -15+ year old van we bought new. Family of 4. Husband drives his company service truck for work. However, obviously we need a second dependable vehicle that all four of us can fit into. He has an old 2-seater sports car (30+ years old) that needs some work so he can sell it. Back to my question.....we have enough money in the bank aside from our emergency fund (3-6 months of expenses) to pay off our mortgage, which is only about $7500. The used cars we are looking at are about that same price. If we don't pay off our mortgage, it would be paid off in a little over a year... Husband thinks we should borrow from profit sharing and pay off house (Dave doesn't usually agree with that), and use cash for a car... I'm sorta leaning toward holding on to the mortgage just a little longer (still could probably pay off this year) and not touching profit sharing...
Thoughts?

[disneysteve]

Keep the mortgage. Use the cash to buy the car. Don't borrow from profit sharing or anywhere else. There's no need to.

I'm curious. If you have been debt-free for 12 years, what made you take Financial Peace just last year? Dave Ramsey's plan is mainly focused on getting folks out of debt.

[RaznKingsKidz]

re: mortgage or car

Thanks Steve. My thoughts exactly. Hubby's argument is that we are paying back ourselves to the profit sharing and he could lower the monthly payments by stretching it out, which are less than $500 already-- and would have more cash from each paycheck....but I would rather leave it alone.

As for the FPU class. We took it for a couple of reasons. The main one was that my husband has never really been on a 'budget' and it was my way to try to convince him we needed to be on one and could save much more if we did. That lasted less than a year because I did all the work and me and the kids were the only ones on the budget! uuggghh However, he isn't a big spender, so I'm not complaining and have chosen not to fight that battle. The other reason was for encouragement and support toward the other several hundred couples in our church who went through the program last spring.

[disneysteve]

Thanks Steve. My thoughts exactly. Hubby's argument is that we are paying back ourselves to the profit sharing and he could lower the monthly payments by stretching it out

I don't know exactly how the profit sharing plan works, but it sounds like it would be similar to taking a 401k loan. Is that true? If so, don't do it. Debt is debt, even if the "lender" is yourself. There are consequences to taking money out of that plan, primarily losing the earnings that the money would generate had you left it there. Yes, you'd be increasing your cash flow, but it would be artificial.

You have a very small amount of debt and it doesn't sound like you are struggling at all. Just keep at it and you'll be totally debt free shortly.

[RaznKingsKidz]

re: debt free mortgage vs car

Yes, Steve it would be similar to the 401K, our money, paying back ourselves plus interest but there really is no need for that. We have enough money in the bank to pay off the mortgage plus still have our Emergency Fund in tack if we don't buy a car. But looks like we need the car more than the mortgage paid off. I'm going back to school full time and work a part time seasonal job to pay for that. Planning to go back to work full time in a couple or three years before he retires. We are late bloomers...46 and 59 with a 12 and 9 year old....so we have college ahead as well. However, we are much more 'work your way through' minded. We can help some but not a lot. Although we've avoided debt, we have still been living on one small income for 12+ years with not much extra for savings---so I could be home with the kids. (no free family child care available for us and couldn't warrant the sacrifices of working just to pay childcare) Anyway, still trying to convince hubby the car over the mortgage! Wouldn't be good if our 15 yr old van went kaplooyee after paying off the mortgage and not having that extra cash!!! Kids are in a charter school with no busing, so we HAVE to have daily transportation...and we can't ride the house to school!! LOL Thanks much for your encouragement!!
Have a blessed 2013!