Tell me your opinions on solutions to this problem...

[Beppington]

Your wife has a perfectly good car that isn't paid off yet. You shouldn't even be thinking about replacing it (or she shouldn't be).

What's the connection between a car being paid off & whether or not it's perfectly good? Are you saying it'd be OK to get a new one just because it's paid off?? I disagree! Driving a perfectly good car with no car payments is the way to go!!

Nobody needs a huge SUV.

Not to be argumentative, but ... ORLY?! Nobody??

And a couple with a first and second mortgage and two car payments has no business looking at another vehicle at this point.

To me the number of different payments matters not; only the debt to income/ savings/ retirement ratio. Of course, zero debt being best.

[Beppington]

We have a minivan and have had one for the past 13 years. I wouldn't be without it whether we had a kid or not.

I've never had a kid but had a Dodge Caravan for 8 years! It was the party mobile for my "crew".

[Beppington]

This may be simpler than getting into all the little details.

Show her the future cost of getting a Pilot now. Suze Orman does that: When somebody wants to buy something now that maybe Suze thinks is an extravagance, she'll say, "Do you realize that $10K is going to be $64K in 20 years??!!!" ... or whatever the numbers are.

So say, "OK honey, we can do it, but just so you know, this is how much it's gonna cost us in ___ years."

Of course, if it comes out to like a $168 difference, I guess you're getting the Pilot now.

[watsoninc]

I'm on your side and would attack the second mortgage. However, I'm newly married, so there is still a lot to learn about keeping martial harmony.

[jIM_Ohio]

This may be simpler than getting into all the little details.

Show her the future cost of getting a Pilot now. Suze Orman does that: When somebody wants to buy something now that maybe Suze thinks is an extravagance, she'll say, "Do you realize that $10K is going to be $64K in 20 years??!!!" ... or whatever the numbers are.

So say, "OK honey, we can do it, but just so you know, this is how much it's gonna cost us in ___ years."

Of course, if it comes out to like a $168 difference, I guess you're getting the Pilot now.

My wife knows how compound interest and investing works, she just leaves most of those details to me month to month. Putting off the pilot purchase has happened twice already, so anything which delays it again (like adding money to a mortgage payment for a house which we already have) makes less sense in my wife's line of thinking.

If your wife's work is commission-based, perhaps anything earned over some baseline can go to the pilot fund? Sort of a personal sales incentive?

Best line of the day. My wife is not in sales, and that is one of those few "never" or "always" things... she will never be in sales (she thinks I should go into sales, but that is another thread). She is an HR consultant and her company contracts her out to small and medium sized businesses which need HR functions done (training, employee handbooks, payroll, legal issues). For example if a doctor's office needed payroll, an employee handbook and some safety training done, my wife can either do all that work, or put client in touch with people which do that work. She has anywhere from 20-35 clients like this at any given time between Cincinnati, Columbus and Dayton.

[sandrark]

Jim:

Is she willing to buy a a Pilot that's 2-3 years old, off lease (as her Accord was?). That takes the cost from $30K down to ~ $20K, and would be palatable, given her willingness to budge on other priorities.

But I gotta say - I don't think now is the time to be satisfying a "want" with the debt you currently have. A first, a second, and two car loans? Even if you wait until the Ridgeline is paid off, that puts you back into 4-5 years of payments again.

You yourself say that you'll be looking for another car every 5-7 years, given her driving. The ONLY way that makes ANY financial sense is if you buy a 2-3 year old car every 5-7 years, instead of a new one every 5-7 years. You will save TENS of THOUSANDS of dollars on depreciation, and it will improve you balance sheet tremendously, over the long haul.

Sandi

PS: FTR, my last car was brand new - I intend to drive it for 10-12 years, which is the only way it makes financial sense of any kind....

[kri$ten]

Putting off the pilot purchase has happened twice already, so anything which delays it again (like adding money to a mortgage payment for a house which we already have) makes less sense in my wife's line of thinking.

I'm not going to give any financial advice. But since you know you are getting it someday, it has already been put off twice and your wife really wants it... maybe it's time for a Pilot.

[jIM_Ohio]

Jim:

Is she willing to buy a a Pilot that's 2-3 years old, off lease (as her Accord was?). That takes the cost from $30K down to ~ $20K, and would be palatable, given her willingness to budge on other priorities.

But I gotta say - I don't think now is the time to be satisfying a "want" with the debt you currently have. A first, a second, and two car loans? Even if you wait until the Ridgeline is paid off, that puts you back into 4-5 years of payments again.

You yourself say that you'll be looking for another car every 5-7 years, given her driving. The ONLY way that makes ANY financial sense is if you buy a 2-3 year old car every 5-7 years, instead of a new one every 5-7 years. You will save TENS of THOUSANDS of dollars on depreciation, and it will improve you balance sheet tremendously, over the long haul.

Sandi

PS: FTR, my last car was brand new - I intend to drive it for 10-12 years, which is the only way it makes financial sense of any kind....

I agree that 8-11 straight years of car payments (3 on lease, 3 on current accord loan, then 2-5 on a pilot) is too much. My wife does not plan on keeping accord until end of its loan unless one of us loses a job or something catastrophic happens. We only bought lease out to solve some cash flow problems last summer, but it was not her intention of keeping car much longer when we financed it out of the lease.

My issue is in the sequence of what gets paid down when... we can easily afford the payments (our combined income is quite high by most middle class standards) and if things work out right, the pilot is the last car we ever finance.

On the point of buying used-
yes she will buy a used one, and the costs we are looking at will be either

40k for a new pilot (we have already priced it out). If I negotiate well, I can knock that price down to 36,900. MSRP is above 40k though.
That same pilot 2 years old will be about 32k, possibly 30k.

If we buy new, we finance 40k for 3 years and probably pay $1200/mo
If we buy used, we finance 32k for 3 years and probably pay $800/mo

Used will last about 6 years, new will last about 8, so the "cost" question is $4800 worth 2 years of driving. Probably, so unless the used is low low milage, we need to buy new as it saves us money (will get more usage out of vehicle for less overall cost).

I realize most people drive cars into the ground, but if you travel for a living you cannot afford to call a client and say "car problems, we'll meet next month" more than once every decade or so... consider in less than 4 years 80k+ miles are on the accord already... wife will drive a car with 150k miles on it to work, but when that happens we will be car shopping again. Its possible that when my ridgeline dies, I get my wife's vehicle and she gets a new one, but that is not problem I am dealing with now...

[jIM_Ohio]

Let me restate problem... if the pilot is the last vehicle we ever finance, what sequence would you apply the loans...

a) finance pilot for 4 years (now) and delay aggressive repayment of 2nd mortgage until after the pilot is paid for (this would mean a car payment of $800-$900 for 4 years then putting about $1500/mo onto second mortgage, which clears it off books in 3 years. Within 7 years we have
1) a pilot which is paid off
2) no 2nd mortgage
3) $1500/mo going to savings and new car fund (within 3 years there is enough for next vehicle)

b) pay down mortgage now with $400+$700=$1100/mo. This could last for about 12 months (pays down $13k of the 2nd mortgage). Then finance pilot for $800-$900 over 4 years, then direct $1500/mo to 2nd mortgage 6 years down the road until its paid off. Within 8 years we have
1) a pilot which is paid off
2) no 2nd mortgage
3) $1500/mo going to savings and new car fund (within 3 years there is enough for next vehicle)

c) pay down mortgage with smaller extra payments and finance pilot for longer term (lower payment). Something to effect of $500/mo to mortgage and $700 to car payment. Takes 5 years to finance car and mortgage might get paid off in 9 years- so in 9 years we get $1500/mo being set aside for next car

**I have not run a spreadsheet with exact timeline, but am estimating based on my knowledge of the interest rates on each**

I realize most people on this board are averse to getting new cars... from a psychological standpoint we will be getting a new pilot or almost new pilot (low miles) because of the number of miles we put on it... and that is what wife wants... the issue is WHEN

The example I used above and will restate here

If a new pilot costs 40k and is financed for 3 years, the Honda payment is about $1200/mo IIRC
That same pilot 2 years old is about 25-35k depending on milage. The 3 year payment would be $800-$900/mo

The "cost" is two fold- $400/mo*36 mos=$14,400.
The second part of the cost is the used car will need to be replaced 2 years sooner (a 2007 pilot will need to be replaced 2 years before a 2009 pilot). This is because we will put same milage on car whether its new or used, so we get 2 more years to save for next car if we buy new.

To me 2 years of car payments are worth a lot more than $14,400, so I would opt for new car- tell me why this logic is bad...

[scfr]

Buy the Pilot as soon as you can pay for it in cash.
The 2 of you can sit down together and come up with a plan (how much you need to save each month and for how long) and work together toward the goal.

[zetta]

To me 2 years of car payments are worth a lot more than $14,400, so I would opt for new car- tell me why this logic is bad...

The risk is that your wife gets laid off and suddenly the high mileage situation goes away but you are stuck with the 2 extra years of payments. From a risk management perspective I'd recommend the cheaper car that gets paid off sooner, even though you have to replace it earlier.

[zetta]

Buy the Pilot as soon as you can pay for it in cash.
The 2 of you can sit down together and come up with a plan (how much you need to save each month and for how long) and work together toward the goal.

Are you getting a tax deduction for all 20% of gross that is going to retirement? Another option is to reallocate the savings so that 15% is going to retirement and 5% to paying off the 2nd mortgage and saving for the pilot. It's a tradeoff between your goal of retiring early and improving your cash flow in the near term. (Leverage can grow net worth faster but adds risk!)

[watsoninc]

Surely there are dependable used vehicles that she can get that won't be 30-40K. I realize you have delayed this purchase before, but would she be willing to 1) delay this purchase until you can purchase it for cash and 2) wait until you feel comfortable (i.e. sans the mortgage debt). I would rather upgrade my used car every 4 years to avoid having 800-1200/mo payments personally, especially while I'm trying to clean up our finances.

[jIM_Ohio]

The risk is that your wife gets laid off and suddenly the high mileage situation goes away but you are stuck with the 2 extra years of payments. From a risk management perspective I'd recommend the cheaper car that gets paid off sooner, even though you have to replace it earlier.

whether new or used, the car would be financed for same (short) period. Probably 3 years, if the budget allows a 2 year payment plan, that is only choice I would consider. Used car has lower payment, and lower shelf life for our household.

[jIM_Ohio]

Are you getting a tax deduction for all 20% of gross that is going to retirement? Another option is to reallocate the savings so that 15% is going to retirement and 5% to paying off the 2nd mortgage and saving for the pilot. It's a tradeoff between your goal of retiring early and improving your cash flow in the near term. (Leverage can grow net worth faster but adds risk!)

$20k plus per year goes to retirement
5k to each ROTH IRA
other 15k is mostly 401k, however wife has 1-2% going to a Roth 401k and another 8% going to a traditional 401k.

I would prefer to leave investments as is... because retiring early is still the goal, the issue is more of how can the $1500/mo clear up cash flow in next 8 years.