Be my Dave Ramsey

[Carrie12345]

I am officially the owner of a fully paid for mini van. Yay!

Now dh and I are trying to figure out what to do about his car.

 

For most of our marriage, dh has driven company cars, and has even had his gas paid for. A little over a year ago, he changed companies and found himself in need of his own vehicle. The company gave him a car allowance, so he went ahead and got a new Prius.

 

Now he's back with the company he started out with. Instead of taking a company car and selling the Prius below value, he negotiated a car allowance.

Technically, we're not paying for the car, but we are carrying the debt.

 

I can't figure out if it would make more sense to sell the car and pay off the difference between the sale price and loan balance (and have dh driving a truly 'free' car), or continue to work on the fairly large debt with company money (plus our own.)

 

Does it *really* even make a difference? I mean, if dh were to lose his job, he would need a vehicle to look for a new job and probably to get *to a new job. And I can't be van-less here, in the middle of nowhere. Even just getting the mail is almost a 2 mile round trip down, then up, a steep hill. Not something I would attempt with at least 3 kids in the winter.

 

Hmm... the more I think this through, the more I think we'll keep the car. Once we get it paid off, the allowance will still be coming in. That's hundreds of dollars each month, rather than driving someone else's leased vehicle!!!

 

Okay, thank you for being my sounding board. :D

[Ohio12]

I think you are right. Keep the car!

[PariSarah]

Pay off the car as soon as possible. (Can you get it done within two years?)

And then enjoy the free money! Use it to save up for the next car or van you need--then you'll really make that allowance go far.

[KIN]

I think, too, that you are making the right choice. :) When the loan is paid for, you will have a car, plus the money coming in! I don't think you can beat that!!

 

Now, I have a question: We have 2 paid for cars, and money to replace 1. But, they will both need replacedin the next few years. We can't come up with money to put back for a new car without decreasing our retirement money. So, that is my question: should we decrease our retirement in order to put money towards a replacement vehicle? We drive a 1995 Chevy Lumina (needs replacing any day now!) and a 2002 Honda Odessey (should last a while, but does have 80,000 miles on it). What do you say??

[PariSarah]

Will you be able to divert some of your car repair budget, for example? Or a wee bit of gas money? Will you get a raise next year that you could use for car replacement?

 

If not, I would save back maybe 10-20% of your replacement budget when it comes time to replace the Lumina. If you've got $8K, buy a $7K car; if you've got $15K, buy a $13K car. Keep at least "seed money" for the van replacement. It sounds like you've got several years yet on the van. Enough time to start figuring out where you're going to get what you need--a little overtime? Some babysitting for the next three years? Culling some of your books, putting them on amazon? You can keep that little bit of seed money for an out-of-the-blue emergency with the van until you're able to build up a more substantial replacement fund.

 

Unless you've been WAY better than average at retirement savings, I wouldn't slow it back for a car, no. People living longer, Social Security insecurities, astronomical cost of the last 6 months of life--whole lotta reasons to have a beefy retirement fund.

[SquirrellyMama]

I think Dave would probably tell you to sell the Prius and get a cheaper car. Even if you sell it for below value you'd probably pay off the remaining balance and the cost of a different vehicle faster with something less expensive.

 

Kelly

[Carrie12345]

I think Dave would probably tell you to sell the Prius and get a cheaper car. Even if you sell it for below value you'd probably pay off the remaining balance and the cost of a different vehicle faster with something less expensive.

 

Kelly

 

The more I think about it though (and I don't know if this is just me trying to justify it, or what), if we were to buy a cheaper car, I'm pretty sure the gas cost would make a huge leap. Dh drives all over the north east (and, right now, the Gulf area). He's getting 53 mpg right now.

 

Obviously, I need to whip out the calculator, but I don't have much confidence that we can find a car that can both absorb the gas increase *and be keep-dh's-job reliable. Too many days in the shop and dh could risk commissions *and salaried employment.

[Amy loves Bud]

Congrats on paying off the van! IF you don't have other debt -credit card, home equity loan, etc. - and if you can pay for the car and still meet your other montly obligations, I would keep the car and put every spare penny towards paying it off asap. Then, I would start saving the car allowance in a "car replacement fund".

 

Way to go!

[Amy loves Bud]

I think, too, that you are making the right choice. :) When the loan is paid for, you will have a car, plus the money coming in! I don't think you can beat that!!

 

Now, I have a question: We have 2 paid for cars, and money to replace 1. But, they will both need replacedin the next few years. We can't come up with money to put back for a new car without decreasing our retirement money. So, that is my question: should we decrease our retirement in order to put money towards a replacement vehicle? We drive a 1995 Chevy Lumina (needs replacing any day now!) and a 2002 Honda Odessey (should last a while, but does have 80,000 miles on it). What do you say??

 

You know, I'm driving a 2003 Honday Odyssey with around 70K miles on it. I'm going to be driving this baby for a very, very long time. Why do you think you would need to replace it? Hondas are very reliable cars and you should be able to get over 150,000 miles on it without many problems at all.

[SquirrellyMama]

Carrie-

 

I would get the calculator out and see what you come up with. I know I have heard Dave talk about this before. His point is you are paying $20,000 for the car to save $200 bucks in gas. Since it take most people a long time to pay off their cars it doesn't come out even.

 

In your dh's situation it could be different since you have a car allowance and he's probably driving more than 70 miles per day.

 

It might work out in your favor then. If you can't tell we are die hard Dave fans in this house :001_smile:

 

Kelly

[Carrie12345]

Carrie-

 

I would get the calculator out and see what you come up with. I know I have heard Dave talk about this before. His point is you are paying $20,000 for the car to save $200 bucks in gas. Since it take most people a long time to pay off their cars it doesn't come out even.

 

In your dh's situation it could be different since you have a car allowance and he's probably driving more than 70 miles per day.

 

It might work out in your favor then. If you can't tell we are die hard Dave fans in this house :001_smile:

 

Kelly

 

Okay, I just went over and did a search on his site. Found the answer for people who are trying to make a decision btw. allowance and company car (and what to look for when taking the allowance), but not an already-got-a-car scenario. A lot left open for interpretation (comfort, appearance for work, reliability, etc.) Lots of stuff to talk over with dh when he eventually comes back from hurricane insanity!

[PariSarah]

The more I think about it though (and I don't know if this is just me trying to justify it, or what), if we were to buy a cheaper car, I'm pretty sure the gas cost would make a huge leap. Dh drives all over the north east (and, right now, the Gulf area). He's getting 53 mpg right now.

 

Just to run through the math, if he does 20K miles a year at 50 mpg, that's 400 gallons of gas. At 25 mpg (fairly easy to find a newer car that gets this), that's 800 gallons. Even at today's prices, that's only a difference of $1500 per year. I think you could probably break even or better with a reliable used non-hybrid, especially given how fast he might be burning through cars if he's traveling that much.

 

But as I said above, I don't think you necessarily need to get rid of it, just because it happens to be more expensive than other cars might be. DR isn't about buying cheap just for the sake of cheap. If the ecological factor and the reliability factor are worth it to you, have at it. Peace of mind is worth a few thousand dollars. It's only if you've got other debt, if you have any struggle to pay bills, if you make $50K a year and have $40K worth of cars in your driveway, that you really can't afford to buy that peace of mind right now.

[KIN]

You know, I'm driving a 2003 Honday Odyssey with around 70K miles on it. I'm going to be driving this baby for a very, very long time. Why do you think you would need to replace it? Hondas are very reliable cars and you should be able to get over 150,000 miles on it without many problems at all.

 

You're right, Amy, the Honda should last us another 7 years or so if we accumulate miles at the same rate. I just know I'll want to replace it with another very nice mini-van and we want to have cash to pay for it. We just haven't been able to figure out where the money will come from. :)

[KIN]

Unless you've been WAY better than average at retirement savings, I wouldn't slow it back for a car, no. People living longer, Social Security insecurities, astronomical cost of the last 6 months of life--whole lotta reasons to have a beefy retirement fund.

 

You're right, Sarah, we shouldn't slow down our retirement. Slowing down retirement would be easiest b/c it would be painless now, so I think I'm wanting the easy way out!!!! :)