Pay Off Car?

[tfoley427]

Hey Everyone! Fresh off of our wedding, and honeymoon, my wife and I have purchased a house that we close on October 25th!! Right now we have no debt except for my car, and her car. Our mortgage payment each month is $1,640 dollars. Right now my car is a 2003 Impala, that I ahve $7400 left to pay, I think about 33 more months, and my payment is $258.00. We have $5000 in an emergency account, $4,000 that we saved this month because of not having to pay rent, as well as having about $14,000 in another account. Does it make sense for us to pay my car off? The car has 93,000 miles on it,and isn't worth more than $2500 dollars according to KBB. It would be great to have the extra $258 each month going into savings. We don't have our money in any high end, high yield accounts or anything like that. THey are just in checking accounts, which obviously we will have tomake a move on. Just curious about the car.

 

[tfoley427]

Any advice would be greatly appreciated!!

 

[adventure_woman]

So you have $19,000 in savings accounts? YES, I would definitely pay off the car. We are halfway trying to do Dave Ramsey and that would be his advice as well. I would read his book and see what he says to do with the rest of it. I'm sure all of it shouldn't be sitting in a low-interest bank account. I don't remember what he said...as we are well far away from having that much extra! Good job!!

 

[msmayor]

Oh heavens...you're WAY underwater on this vehicle.

In my opinion, the best thing you can do is get that loan off your back and pay it off. Prolonging the payoff is only INCREASING the amount you're paying for a 7-year-old car with almost 100K miles.

Get it paid off...and drive it until it dies. Realistically, with good maintenance, you can get another 60-70,000 miles. Bank the money you would have paid out in these car payments to build up a nice downpayment (or even the ability to pay cash!) for the car that will eventually replace this one.

And never allow yourself to get this far upside down on a car again. Its a big hole to dig out of.

 

[slamzim]

Definitely pay off your car then double up to pay off your wife's car. Then build your savings back up! You will LOVE not having a car payment!!!

 

[tfoley427]

Yeah the biggest problem was I bought the car with 0 money down July of 2008 right before the markets crashed. Car was worth $9100 bucks, roleld the warranty and basically everything else including taxes into the total purchase price. Friggan sucked.

 

[clh2]

Personally - I would hold off until after you close on the house. I would also not make any major purchases (either cash or credit) until your hosue closing is done. I'm talking about furniture/furnishings/appliance for your new house.

I have heard of banks re-verifying all bank balances, credit cards, and credit reports just before closing.

Get into the house. Wait a little bit, and once you are certian that nothing expensive needs replacing...then I owuld go ahead and pay off the car.

ETA: HOLY SCHMOLEY with the amount of typo's in this post...and I've already been quoted...YIKES!!!!! Sorry!!!

 

[scboyd]

Personally - I would hold off until after you close on the house. I would also not make any major purchases (either cash or credit) until your hosue closing is done. I'm talking about furniture/furnishings/appliance for your new house.

I have heard of banks re-verifying all bank balances, credit cards, and credit reports just before closing.

Get into the house. Wait a little bit, and once you are certian that nothing expensive needs replacing...then I owuld go ahead and pay off the car.

I have to agree with clh2 wait until after closing but definitely pay off the car and then I would stash way the monthly car payment until you have enough to pay off your wife's car and then clear that debt as well... Congrats on the new house!

 

[justbishop]

I agree with the "close on the house first" camp here. Once that's done, though, here's a quick summary of what I got out of reading Dave Ramsey's Total Money Makeover, and how I'd proceed if in your shoes:

1. Take $1000 of your savings and set it aside as a starter emergency fund. Stop using credit cards (if you do now), and get yourselves on a good budget.

2. Use the rest of your savings to pay off ALL debt except your mortgage (including BOTH cars).

3. Use all cash that WAS going toward debt (car payments and any other debts you paid off in step 2) to build up an emergency fund equal to about 6 months of your expenses.

4. Stay on budget and use all cash that WAS going to build your 6 month emergency fund and start throwing it at your mortgage payment.

 

[DonnaDuck]

Personally - I would hold off until after you close on the house. I would also not make any major purchases (either cash or credit) until your hosue closing is done. I'm talking about furniture/furnishings/appliance for your new house.

I have heard of banks re-verifying all bank balances, credit cards, and credit reports just before closing.

Get into the house. Wait a little bit, and once you are certian that nothing expensive needs replacing...then I owuld go ahead and pay off the car.

ETA: HOLY SCHMOLEY with the amount of typo's in this post...and I've already been quoted...YIKES!!!!! Sorry!!!

I also agree...
We just moved in a house that we built a couple months ago. Before we closed, we talked to the bank about paying off my husbands car before the mortgage payments started rolling in. The bank told us to not do that until after we had closed and were in. Surprisingly to us, they explained that although paying the car off is a good thing...we shouldn't do anything to affect that credit score. Good Luck!

 

[Cheshire Figment]

Wait until after closing on the house.

Check to see what you need to do to the house to make it livable, such as furniture, cookwear, etc. New paint or anything else.

Then pay off the cars.

 

[tlbwriter]

Definitely pay the car off after you close on the house. Then you can start putting your car payment into savings to go toward your next car.

 

[gillenkl]

Definitely pay the car off after you close on the house. Then you can start putting your car payment into savings to go toward your next car.

Totally agree - get into your house then pay off the car.

 

[tfoley427]

No no no, I wouldn't pay it off until after the closing. As I stated we have $5,000 in an account for just emergencies.

 

[ceecee]

There are bound to be additional expenses with the new house. After that pay off the car and drive it until it dies. Try and recoup some of the $. It seems like a lot of $ for a car that old with that many miles.

 

[wmharley]

+1 wait. Underwriters do a final verification 2-3 days prior to close to verify everything is the same.

Once you close, go for it. Also... go to the post office and get a change of address. Home Depot gives you a 10% coupon for the change. I think you have to sign up now. Lowes does the same thing.

We bought over $1300 of new items (paint, fans, blinds, ladders, etc) and saved some cash when we moved in.

 

[bumbershoot]

I agree with the "close on the house first" camp here. Once that's done, though, here's a quick summary of what I got out of reading Dave Ramsey's Total Money Makeover, and how I'd proceed if in your shoes:

1. Take $1000 of your savings and set it aside as a starter emergency fund. Stop using credit cards (if you do now), and get yourselves on a good budget.

I would probably leave more in the savings account, just b/c houses take money! And a new house is going to take extra money. On the other hand, sometimes having to wait to furnish a place makes sure that you really really want each piece of furniture. My brother and sis in law, who have scads of money and are brilliant at finances, always wait wait and wait some more to fully furnish a house, and they still have furniture from when they were in college, to make sure that they are making a good, lasting decision about good, lasting furniture, that will last them a good long time.

But with a new house, I'd definitely do more than the 1K.


But heck yeah, pay off those cars!

OP, we bought an '05 Grand Marquis in August '07. Rolled everything into the payment, and got hideous interest on it b/c hubby had "neutral" credit. Did end up getting their GAP insurance refunded to us once we got it through our insurance policy (you do have that, right, a GAP policy?), but it would have been paid off over time. Had a 66 month loan.

Spent two years paying on the due date, even after the due date into the "grace period", paying sickening amounts of interest because of when we paid it. I then got control of the finances, started paying it before the due date, then we got a bonus and I put it towards that...paid it off at 35 months. The first two years we paid something like 5K just in interest...the last year we paid something like $150.

Even if you have a good interest rate (and I'm sure you do), you're still most likely paying more in interest on the thing than you are earning in the accounts...so take that money and pay off the cars!

Being upside down is such a mental game. It doesn't matter even one bit unless you *have to* sell it. And honestly I didn't see the used car market change much with '08 and beyond...we were underwater/upside down on our loan the first MONTH we bought it, and I kinda think you were too. But ultimately it's nothign to get frazzled about...you agreed to pay x amount (along with whatever interest that happens in that time), just like we did, so don't let the upside down part of it get to you. It's all in your head, especially since you're not selling it.

 

[alwaysmom]

Keep in mind that when your ready to pay off your car, you can call the loan office and ask if they will accept less to pay off. We made an offer and they countered. We accepted there offer (M & T) and saved $1800.

 

[CC12005]

Be careful offering a final payment for less than the amount owed. Sometimes it shows up on your credit report as a settled debt which would lower your score.

 

[musical2]

If you can afford it always pay off that which depreciates in value first. That would be the car.