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

[jIM_Ohio]

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 payments 800-1200/mo payments personally, especially while I'm trying to clean up our finances.

Keep in mind we have the pilot priced. She is not going for the lower model, she is going for whichever one is at top end- leather seats, entertainment system etc... we know MSRP on new pilot is about 40k. I was able to negotiate a dealer down to 36.9k before we walked out last time we "almost" bought one. Used pilot, 2-3 years old with 15k miles per year will be between 25k and 32k- done enough homework to know the price range there as well. She knows the specific model and color and options she wants, and will hold out to get that specific vehicle (not in a rush because the accord functions short term).

Delaying to pay cash for the pilot is not an option, because if we did anything with cash, it would be pay down 2nd mortgage, and by time 2nd mortgage was paid off, the accord would need to be replaced anyway. It is optimum to pay cash, this will be last car we finance.

[MonkeyMama]

Surely there are dependable used vehicles that she can get that won't be 30-40K.

Agreed.

(knock on wood, but having driven some really old cars, not sure I have ever been stranded on the side of the road - but for a dead battery or a flat tire. Both which happen to new cars too).

Oh, I've had the friends who told me they could settle for nothing less than brand new, with their commute, etc. I have driven that much for work, and to me, it made much more sense to get something lightly used and inexpensive, since I would go through cars so rapidly.

My other thought is to wait it out. There is only really a period of 1-2 years that it gets cramped with carseats and strollers. The kids will graduate to booster seats and won't need strollers. By the time you get the Pilot, you might find you won't need the room any more. Just kind of how it goes. (For the long run will probably need more room, but if you are buying a car every few years... Maybe she should just suck it up for now).

[ActYourWage]

Agreed.

(knock on wood, but having driven some really old cars, not sure I have ever been stranded on the side of the road - but for a dead battery or a flat tire. Both which happen to new cars too).

Oh, I've had the friends who told me they could settle for nothing less than brand new, with their commute, etc. I have driven that much for work, and to me, it made much more sense to get something lightly used and inexpensive, since I would go through cars so rapidly.

My other thought is to wait it out. There is only really a period of 1-2 years that it gets cramped with carseats and strollers. The kids will graduate to booster seats and won't need strollers. By the time you get the Pilot, you might find you won't need the room any more. Just kind of how it goes. (For the long run will probably need more room, but if you are buying a car every few years... Maybe she should just suck it up for now).

it's called status, some people have to "look" good.

I agree with your post, but the OP is dead set on getting a pilot (new or slightly used - fully loaded.)

[creditcardfree]

My opinion: option A. Finance the Pilot now, pay it off agressively. And then hit that second mortgage.

Posts from others are valid, but don't answer the original question.

[Slug]

I'm not sure I'm buying that you've fully explored the opportunity costs associated with an unnecessary purchase. She may understand compounding interest, but does she really understand what a 7.7% 2nd mortgage is doing to you. If she delays the purchase until you can refinance it once you reach 20% equity, the economic value once calculated could be compelling.

[Beppington]

I'm not sure I'm buying that you've fully explored the opportunity costs associated with an unnecessary purchase. She may understand compounding interest, but does she really understand what a 7.7% 2nd mortgage is doing to you. If she delays the purchase until you can refinance it once you reach 20% equity, the economic value once calculated could be compelling.

x2...

[jIM_Ohio]

I appreciate the responses thus far.
Please realize a few things- my wife allows me to invest close to 25% of our gross income in retirement accounts in hopes of retiring relatively young. She wanted the pilot 4 years ago, but getting a new pilot and new ridgeline would be 80k+ of car and was not in the cards at the time.

We might have made a bad decision getting two new cars 4 years ago (probably should have gotten one of them lightly used), but we cannot erase that now. I can tell you that waiting 7-10 years to save up to pay cash is not doable- her accord will be driven into ground in maybe 5 more years, and probably closer to 3-4. It will be "impossible" to pay cash for the pilot and pay off 2nd mortgage in 4 years. It is possible to pay them both off in 8 years or less, so that is mindset I am using on this problem right now.

Most important thing for me is to maintain the marital harmony- she will get her pilot, even if it is financially inefficient to do so based on 7.7% interest rates or other factors.

I am trying to find the most efficient way to use the money inefficiently.

[wincrasher]

Fully-loaded cars are for people who are "loaded".

It seems funny that someone who drove a Ford Focus for years would now want a fully optioned SUV.

Sounds like you are gonna buy it no matter what we advise. I'd just recommend scaling back on the options.

[disneysteve]

she will get her pilot, even if it is financially inefficient to do so

I think a lot of us (myself included) missed the point of this thread. Jim wasn't asking our opinion on whether or not they should buy the Pilot. He was asking how best to go about it. Whether or not I would buy a $40,000 SUV is irrelevant.

Looking back at the first post, Jim, I'd say the best option will depend on the interest rate on the Pilot loan and how it compares to the 2nd mortgage rate. If you are able to snag really low financing on the Pilot, it might be best financially to take a loan for more than your intended 3 years, reduce the monthly car payment and be able to throw more money at the higher rate 2nd mortgage. So if Honda comes out with 1 or 2% financing when you are ready to buy (after your truck is paid off), I'd grab that for the longest term available and take the full time to pay it off, putting your money to work more efficiently against the mortgage.

[graceful]

Most important thing for me is to maintain the marital harmony- she will get her pilot, even if it is financially inefficient to do so based on 7.7% interest rates or other factors.

I am trying to find the most efficient way to use the money inefficiently.

I think a lot of us (myself included) missed the point of this thread. Jim wasn't asking our opinion on whether or not they should buy the Pilot. He was asking how best to go about it. Whether or not I would buy a $40,000 SUV is irrelevant.

Looking back at the first post, Jim, I'd say the best option will depend on the interest rate on the Pilot loan and how it compares to the 2nd mortgage rate. If you are able to snag really low financing on the Pilot, it might be best financially to take a loan for more than your intended 3 years, reduce the monthly car payment and be able to throw more money at the higher rate 2nd mortgage. So if Honda comes out with 1 or 2% financing when you are ready to buy (after your truck is paid off), I'd grab that for the longest term available and take the full time to pay it off, putting your money to work more efficiently against the mortgage.

I think disneysteve's suggestion is the most efficient way to use the money inefficiently. Try to get the car loan interest rate as low as possible. Hopefully it will be much lower than 7.7% and then pay down the 2nd mortgage asap.

[Beppington]

Jim wasn't asking our opinion on whether or not they should buy the Pilot. He was asking how best to go about it. Whether or not I would buy a $40,000 SUV is irrelevant.

Let's call it an intervention ... Ha-ha!

After all, he isn't wanting to buy the Pilot anyway, if I remember the original post.

I liken this to asking, "I wanna jump off the Golden Gate bridge; Do you think I should jump off here or over there?" ... Ummmm, hello ... neither!

[kv968]

Pay $1100/mo to second mortgage until a big dent is in it and keep the accord for 1-2 more years.
Negative- wife does not like this idea
Positive- can refinance first mortgage if needed and create more than $1500 extra cash flow short term.

I noticed you only brought up refinancing once with the idea that it would provide extra cash flow short term which it would. However, would refinancing help you long term? I know you probably don't want to extend your mortgage any further than it is since you're looking for a reasonably early retirement but you may want to look at it.

What's the rate on the original loan? How long have you had it? And, assuming that the second mortgage was to avoid PMI, when would you have 20% equity built up if you were to refinance?

Maybe I'm missing the point and the numbers don't work but it may be something to consider.

[jIM_Ohio]

I noticed you only brought up refinancing once with the idea that it would provide extra cash flow short term which it would. However, would refinancing help you long term? I know you probably don't want to extend your mortgage any further than it is since you're looking for a reasonably early retirement but you may want to look at it.

What's the rate on the original loan? How long have you had it? And, assuming that the second mortgage was to avoid PMI, when would you have 20% equity built up if you were to refinance?

Maybe I'm missing the point and the numbers don't work but it may be something to consider.

Closed on house Dec of 2005. rate was around 6.5% on 1st and variable on a HELOC second

In June of 2006 we refi to 2 30 yr fixed loans
1st is 5.75% 280k financed
2nd is 7.7% 50k financed
no cash out
both 30 year fixed.

Payments are $2200 including taxes and insurance on first
$400 on second

From my standpoint I look at problem as "fixed cash flow"
$500/mo to each IRA
$2200 to 1st
$400 to 2nd
$700 to my truck
$400 to her car

and the goal is to make "all those go away" by 2026. Not much extra money could be "created" unless one of us works 2 jobs (I used to coach soccer and get paid, but that is not in my cards for immediate future... if it does get put back in, that is 10-15k per year I can use to "easily" solve some problems).

As I think about problem, I see it "two different ways".

One way is that is we bite the bullet and get pilot now, wife has committed to all other cars are paid in cash after that already. So do 4 years of car payments now, and then done with car payments and that $1100/mo is now able to work on the other 2 larger debts sooner. Payoff date on this idea is 2017 on 2nd mortgage.

One way is to find the path of least resistance with money, meaning snow ball the second mortgage, then finance the car with $1500/mo once 2nd is paid off... biggest issue here is there is a "clock" on how long her current car lasts, and by my calculations $1100/mo pays off 2nd mortgage in 5 years, and her car will not be reliable in 5 years based on her current milage projections (that would be close to 200k miles). Key word there is reliable- meaning she cannot afford to have a car breaking down and missing client appointments or its possible the IRAs or something else get stopped to get her a new car. Payoff on this idea is 2015 on 2nd mortgage, with another 2-4 years of a $1500/mo car payment following.

[creditcardfree]

Think about this: How quickly would your time line change if you stopped IRA money for a short period of time? Something has to give in order for your time line to change. Are you willing to retire on less, or work longer, to have your Pilot and 2nd Mortgage paid sooner?

[jIM_Ohio]

Think about this: How quickly would your time line change if you stopped IRA money for a short period of time? Something has to give in order for your time line to change. Are you willing to retire on less, or work longer, to have your Pilot and 2nd Mortgage paid sooner?

retirement is first priority, everything else on the path to that one goal is flexible to me, and some things are more or less flexible to my wife.

My wife getting the pilot is not negotiable
the time table to acquire it (within 24-30 months) is.