DH to get company car - need advice

[frugalredhead]

Hi everyone! So my husband found out yesterday that they are most likely re-vamping his position at work and giving him a new title, company car, and they may be revising the pay scale. He is already near the top of the scale so as of now, we have no idea if he will be getting any increase in his pay. Because he already makes so much, he may just stay where he is. This is rumored to be happening effective January 1st.

Here's our scenario:

2014 Chrysler Town & Country - just bought in March, owe about $33K at 2.25% Paid way less than MSRP because DH gets discounts through work, so even though it's new, we owe about what it's worth right now. Have already put 15K miles on it since March - I have a decent commute and this is the vehicle we use for longer trips because of the amenities for the kids, so it gets a lot of miles.

2010 Nissan Frontier - we owe about $10K and according to kelly blue book we could sell private party for around $16K. Will be paid off in 28 months. Truck is the only vehicle we have that can tow the camper.

Pop up camper - bought September 2012, owe $10K and would only be able to sell for about $6K from what I've found online. Interest rate is 7.24%. We do a lot of camping and it has become a really important thing for our family to do together. Campsites are $30 a night and if we switched to cabin camping, it would be $100 a night. Both DH and I have bad backs and it gets hot and stormy here in Virginia in the summer, so tent camping is kind of out or else we wouldn't do it much.



Here are what hubby and I have come up with as our choices:

1. Keep current minivan and truck. Use new company vehicle for ALL travel - DH will drive it to work during the week, which is a very short commute, but I will drive it to my weekend job and we will take it on all long trips and for driving around town. This will greatly decrease the mileage on our current 2 vehicles. We thought I could alternate between using the van and truck for my commute, but now that I think about it, we'd either have to buy 2 more car seats or mvoe them back and forth all the time, and that is a royal pain in the neck. The minivan gets better gas mileage so I'd probably just use that mostly.

2. Sell pickup truck and camper. What we would make on the truck would be about equal to what we'd lose on the camper, so we'd more or less break even. Cost of cabin camping vs using our camper would cost us about $1000 more a year, but the payments we'd save on the truck and camper amount to $500 a month. I'm not crazy about this idea just because we love our camper and it's become like a second home

3. Trade in truck and minivan, and buy an SUV that could tow the camper. A big part of the reason we got a minivan was because it was about $10K cheaper than a SUV with the same amenities. The fear with doing this is that we'd then have a higher payment on new vehicle than on the minivan, although lower than what we pay for van and truck combined. However, if DH were to get a job that didn't include a company car, either with his current company or elsewhere, we'd then have to go out and buy another vehicle, making our payments MORE than what we're paying now.


Few notes: DH is STRONGLY against buying a very used vehicle. He is a worrywart beyond belief (like to the point where I joke about mixing anxiety medication in with his food and not telling him) and to have a vehicle out of warranty practically gives him heart palpitations. He bought his truck about a year or two old with very low mileage, but he would never go for buying something 3 or 4 years old with 40K miles on it, for example. There is no talking him out of this, so we choose to cut back elsewhere instead.

We have a LOT of credit card debt and I have gotten a 2nd job and we have made a lot of cutbacks already. We are on pace to have the remaining credit card debt paid off by June 2017. Next after the credit cards was going to be the camper, as the interest rate on that is lower than the credit cards.

Sorry that got so long... so what option would everyone here choose, or is there another option we haven't though of?

[greenskeeper]

you need to find out the details of the company car. Does the company pay for fuel regardless of whether the miles driven are for the company or leisure? Will the miles have to be split somehow and you pay for the personal use miles?

Why can't the van tow the camper? How much does the camper weight? Look at the towing specs for the van and I'd bet it can pull the camper just fine.

[disneysteve]

is there another option we haven't though of?

This!

You guys have quite a mess on your hands. I think by just looking at the car issue, you're missing the bigger problem. Your husband (and you) can't keep buying expensive toys that you can't afford just because he has an aversion to driving something not covered by a warranty.

You owe $43,000 on cars, another $10,000 on the camper (at a ridiculous interest rate), and "a LOT" on credit cards (probably at even more ridiculous rates). Does it bother your husband at all that you've had to take on a 2nd job to help make ends meet so that he can have his shiny new car?

I would sell the van, sell the truck, sell the camper. Get the company car for him and something modest, used, and affordable for you. Your kids don't need "amenities". We've driven over 1,000 miles each way to Florida every year since our daughter was 6 months old in a van with no DVD player or video system or any of that nonsense. She entertains herself with books and games that she brings along.

Then sit down together and work out a budget that cuts expenses as much as possible (post your budget here if you'd like some help with that) and start attacking the credit card debt. You guys need to start living within your means rather than way beyond them.

[HappySaver]

Of course the first step is to wait until the company car is confirmed and you have details.

If that goes through, I like option #2. You're overextended and should only own one car of your own if you also have access to a company car. The camper just sounds like a luxury expense you cannot afford. You can buy another one AFTER you've paid off the credit cards and have saved enough cash to pay for it outright. There are always used campers to be had.

[snafu]

I sincerely hope the rumours are correct so that DH gets a raise and company car. Can he choose a vehicle that will suffice to tow the trailer since it seems it's also for personal use?

This change may be a good time to review choices based on how to best reduce sums owed on vehicles, their operational and maintenance costs. There are so many factors to consider. How many days do you actually use the camper? How many days do you actually drive the truck? Is the insurance seasonally adjusted for camper & truck? Is the mini van best for your commute? What vehicle type, year, model will meet your needs?

How can those factors improve your ability to snowball existing CC balances which continue to add interest until your anticipated 2017 payout. DH needs to understand how much interest is being paid out. His choices negatively affect the family's Net Worth. It is important to work out how much has been paid out in interest on CCs, vehicles, mortgage between January - December 2014. You mentioned $ 90K in CC debt last February and the new Town & Country added more than $ 33.K. How much of your income is actually going to debt payout and how much goes to the long list of employment expenses like tax, transportation, higher food costs, grooming, wardrobe, childcare etc.

Just imagine how much disposable income you will have when you are no longer paying fees and interest. You will be in control of your income and make the decisions.

[frugalredhead]

Thanks for all the input! Let's address the questions one by one...

DH has had a few company cars with his company so I am well versed in how it works. It is for both business and personal use, but they do not pay for fuel. It is just like having your own car, except we don't pay the car payment, insurance, or maintenance. And we are not allowed to have a tow package added to it, unfortunately.

We did not actually add $33K in debt when we bought the new van. My old van was not paid off and it needed quite a bit in maintenance/repairs. Our new payment is less than the old payment, and the new van gets better gas mileage. I am actually saving money each month having the new vehicle. Yes, I realize that we could save money if DH wasn't averse to having a more used vehicle, but it is what it is. We all have things we are not willing to compromise on. Would you live in an unsafe neighborhood just because it's cheaper? DH doesn't want me and the kids driving around in a vehicle where there is an increased likelihood of it breaking down.

We camp about 7-8 times per year. I did the math and it would save $700 a year to camp in cabins instead of having the camper payment/personal property tax. That hardly seems worth the amount of money we'd lose selling it at this point.

DH drives his truck 5 days a week, and my van is actually pretty good for commuting! Insurance is minimal on the camper (I think about $100 a year) and the truck is my husband's primary vehicle so no seasonal adjustment needed. If he does get a company car, I'll be able to decrease the insurance on both the van and the truck because of the decrease in miles.

Our only "toys" are our cars and camper. And I have seen everyone on here give people the advice time after time to sell their vehicles, take huge losses, and buy cheap vehicles, and I have to respectfully disagree on that point. It makes very little sense to me to lose thousands of dollars to buy something with higher mileage that is going to cost me money and won't last as long. I absolutely know that there is NOTHING that is going to come up on my vehicle that is going to cost me money in the next couple of years (by then it'll just be brakes and tires, the usual stuff). My oil changes, tire rotations, and state inspections are included by the dealer, so no vehicle maintenance budget needed. I know my car will start when I leave here at 6:30 AM and have my kids all bundled up in the cold. That's well worth it to me.

Right now about 30% of our income is going towards credit cards. DH and I haven't gone out together in nearly a year, I have cut our grocery budget in half, and we do all free things with the kids. I have paid off $15K in credit card debt in the last 12 months. I am very happy with our progress and am not willing to sacrifice our camping trips with the kids.

DH is not "bothered" that I have gotten a 2nd job to pay for "his toys" because that is absolutely not the case. I got a 2nd job, doing something that I love and want to keep up my skills in, to pay for irresponsible spending that we have BOTH done over the years with credit cards. I wouldn't put vehicles that are used on a daily basis, that get us to our jobs, at extremely low interest rates, in that category. The spending that got us into trouble was mini-vacations that we couldn't afford, buying useless items "just because" they were on sale and seemed like a good deal, etc. There is no more of that going on anymore.

I will have to check on whether the van can tow the camper, DH seemed to think that it couldn't but I will look into it!

Thanks for all of the input. I don't want anyone to think that my disagreement on some points means I am any less appreciative that you took the time to give your advice

[corn18]

Your actions belie your username.

Sell the truck, the minivan and the popup. Get a minivan as a company car. Buy a used, high mpg sedan (Toyota Corrola gets better mileage than a Prius).

With all of that monthly cash flow you just freed up, you should be able to pay off the credit cards a year early.

Once you are debt free, decide if you need a popup. Or a new car. I think you will be amazed at how your attitude will change once you have no vehicle or credit card payments. I have a 7 year old truck that I would have easily replaced already if all it meant was renewing the monthly payment. Now that I have no car payments, I cannot buy a replacement until I have enough saved up. All that means is I have to drive around a perfectly good truck for the next few years.

Adjust your perspective and live up to your user name. Your quality of life after getting rid of these debt laden vehicles will amaze you.

Good luck.

Tom

[disneysteve]

2014 Chrysler Town & Country - just bought in March, owe about $33K

We did not actually add $33K in debt when we bought the new van. My old van was not paid off and it needed quite a bit in maintenance/repairs. Our new payment is less than the old payment, and the new van gets better gas mileage. I am actually saving money each month having the new vehicle.

So you bought a brand new van, rolled in the remaining debt on the old van, and your payments are still lower than they were. May I ask how long of a loan this is? The only ways I can figure that the payments would be less is if you stretched out the repayment over a longer time frame or if the new van was a lot cheaper than the old van. To say you're "saving" money each month just doesn't sound quite right when you're dealing with a $33,000 loan.

[frugalredhead]

It's a 5 year loan, same as the first van was. The loan on the 1st van was at 0% interest, and my husband gets steep discounts on new vehicles (another reason it's worth it for us to buy new instead of used). We are never upside on a vehicle for that reason. They gave us more for our trade in than we owed on it. I realize it's not "saving" per se, but when I'm lowering the monthly payment on a 2% loan, thereby freeing up money to pay more on higher rate credit cards, it's a smart move. When the credit cards are paid off, we'll do shorter loan terms, but it's not the way to go as long as we have higher interest debt.

[maynard]

I never understood the thinking that having a car payment + a new car warrenty is better than a paid off car that is in good condition.

Lets just say if someone had $600 worth of car payments every month plus a warranty....
Thats $7200 per year.

On a bad year my paid off car might need $2500 in repairs throughout the year. An entire rebuilt motor would cost way less than $7200

The math just never makes sense to me. New cars and new car payments are the huge money sucker. Not used cars out of warrenty

[greenskeeper]

I never understood the thinking that having a car payment + a new car warrenty is better than a paid off car that is in good condition.

Lets just say if someone had $600 worth of car payments every month plus a warranty....
Thats $7200 per year.

On a bad year my paid off car might need $2500 in repairs throughout the year. An entire rebuilt motor would cost way less than $7200

The math just never makes sense to me. New cars and new car payments are the huge money sucker. Not used cars out of warrenty

I just reviewed this for the past year. Our fleet includes:

1997 F250 Crew Cab 4x4 Diesel w/ 186k miles
1998 Jetta TDI w/ 175k miles
1999 F250 Crew Cab 4x4 Diesel w/ 233k miles

total repairs/maintenance for all three vehicles.....$1720 (I do all my own work)

I think I'll hold onto my "paid for" vehicles for yet another year.

[SavingSteve]

I really think since you have "a LOT of credit card debt" you should get rid of all the vehicles and payments, buy something used for yourself with the proceeds, then put the former payments towards your credit cards.

It really seems when I read your posts that you want to justify having all these vehicles when you really can't afford it. It's understandable that your DH wants you to be in a newer more reliable vehicle, but why not make that your motivation to get rid of the credit card debt?

All those payments are like wearing ankle weights slowing you down from getting your credit cards paid off.

Try adding up all your payments and see how much cash you would have if they were gone.

Also try adding up all the extra CC interest you're going to pay if you dont apply those car payments to the CC.

Sometimes the smart thing to do is the hardest and the least appealing option.

[disneysteve]

It's a 5 year loan, same as the first van was.

When the credit cards are paid off, we'll do shorter loan terms

Here's the fault in your mindset IMO.

You could do shorter loan terms right now, today, if you would buy cheaper cars. I don't care how big of a discount your husband gets on a new car (although that is a really nice perk to have), if you can't afford the car on a 3-year loan witha payment not exceeding 10% of your monthly take home pay, it's out of your budget. How much would it have cost to get a brand new van that was a base model rather than one that was fully loaded with all of the bells and whistles? The Town and Country is the top of the Chrysler line. I'm sure a base model Caravan would have been at least $10,000 cheaper if not more. That would still have given you a brand new van and a much lower, more affordable payment, that would have freed up money every month that could be going toward the credit cards instead.

Don't get me wrong. I think it's great that you guys are reforming your ways and have made a huge dent in your debt in recent months. That's great. My point is just that there are still ways that you could move the needle a lot more by altering some habits regarding big ticket items, namely cars. For most people, after their house, their vehicles are their second largest purchase expense so it can make a huge difference to your overall finances.

As for buying new vs. used, you guys do have a unique situation because of the discount he gets. I don't know how big the discount actually is but if he's able to buy a brand new car for the going price of a 2 or 3-year-old one, then buying new probably is the way to go, but not for the reasons you've stated. It has nothing to do with reliability or maintenance costs. Used will always be cheaper than new and cars today are built far better than ever before and require much less costly maintenance. I had my last car, which I bought used, for 14 years. My current car is 9 years old. I bought it 2 years ago and my maintenance costs have come to a few hundred dollars per year so far, probably about the cost of 2 or 3 months of payments had I gotten a new car instead.

[LuckyRobin]

Certified used cars generally come with warranties. They are no more than 5 years old and have been completely checked out by the dealership. They are a good option combined with a roadside assistance program. And a lot of them have all the goodies you want at a much lower cost.

[disneysteve]

Certified used cars generally come with warranties. They are no more than 5 years old and have been completely checked out by the dealership. They are a good option combined with a roadside assistance program. And a lot of them have all the goodies you want at a much lower cost.

OP has a unique situation though since her husband gets what sounds like a substantial discount on new cars only. I'm really curious to know the actual size of the discount. If he gets the new car for the price of a comparable 2 or 3 year old used one, buying used makes no sense.