Our Upside Down Car Loan

Earlier this year hubby and I bought a new(er) car replacing both of our vehicles with a vehicle that has never been in an accident but came with a bigger car loan.  At the time of signing the loan I felt my stomach turn a little, I knew it was too much but it seemed like the right this to do.  We now owe $29 000 on a car that isn’t worth as much.  Before we owed $12 000 on a car that wasn’t worth that much.

We talked about looking into selling the car and buying something smaller both in size and in the loan amount.  Today we went to a dealership who said our car was only worth about $19 000 to trade in.  Ouch.  That’s a hit of $10 000 since January?  Well not quite since we started this loan with negative equity.

I’ve been listening to Dave Ramsey’s pod cast a lot lately and one of his most common pieces of advice is to sell the car especially if you can’t pay it off in two years.  At first I didn’t take the advice so seriously, thinking we just got this car and we got it to keep it for a long time.  We also downsized to only one vehicle.  After a while of thinking and listening to Mr. Ramsey, I really started thinking selling might be the best option because at least it would leave us with a smaller loan to pay off even if we took a bit of a hit.

Here you can’t find a half decent car for less than about $10 000.  If we bought a $10 000 car and traded ours in for $19 000, we’d still end up with a $29 000 loan but with an older car.

Our other option is to work our butt’s off and pay off this car as soon as we can.  Sitting down and figuring out what our budget looks like, fingers crossed we can pay off the car by spring of 2015.  Much better than the spring of 2020 that our loan was for.

I think Dave Ramsey has good advice, but it doesn’t seem like it will work in our situation. The best thing I think for us to do is to call it a stupid mistake, keep the car, work our butts off and get it paid for and never finance a car again!