WWYD- Need new car due to accident.

[puffkin]

Here are the facts:

DH was in an accident last week (thankfully everyone is fine, no injuries). We have a 2006 Toyota Corolla. Tow truck driver for the auto body shop happened to be one of the workers filling in for the driver and he estimated that the car would probably be totaled by the insurance company. We are still waiting for the final word on that from insurance company. Based on blue book values (being conservative) I think we would get about $6,000 if they do decide to total it.

Some additional facts:
-We still owe about $2000 on the car, payment is $213 a month.
-We both have job issues. DH lost his job in Feb. He is working PT at Target and collecting unemployment. I lost my job last June and have been in a long term temp position since September. No word on if it will go perm anytime soon. I also work PT at a retail store. We have both been sending resumes out left and right and had a few interviews, but nothing has panned out yet.
-My car (2004 Ford Escape) is paid of with no major mechanical issues. Knock on wood.
-Due to my job loss (I was our breadwinner and now make about 50% of what I was making) we ate through our savings and currently just make enough to pay our bills. We have cut out pretty much all extras and made many positive budget changes.

Obviously we hope the car can be fixed because it is worth more to us than to the insurance company. Plus we really liked the car. But if they do total it, we are not sure what our best move would be given our job situation. While I would love to not have a car payment, we are comfortable with the $200/month we pay now. We could:

1. Take the inurance payment and pay off the car loan. Use remaining money for downpayment and try to get into a new car loan for about the same monthly payment. Probably could get another Corolla or something similar. We don't want to, but parents have offered to cosign if we can't get approved for loan. Would extend our payments out several years, but we would have a car to show for it at the end.

2. Lease a car. Several good lease options right now for about $200/month for a similar car. 36 month lease, $0 down, $0 deposit. We could take the insurance money to pay off corolla, cover the few lease fees and to pay off the one other small debt we have which would free up another $100/month. The remainder would go to savings along with that $100 month. Give us a little cushion with the unemployment. Not sure if we would need a cosignor to qualify for a lease, but again my parents are more than willing.

3. Take the insurance money and buy a junker to get us through until we are in a better employment situation, hopefully in 6 months or less.

 

[PrincessSuzanne]

Based on my experience when DH totaled our car, the insurance automatically paid off what was remaining on our loan, then deducted the amount for our deductible and sent us a check for the balance.

I took what was sent to me and went to the dealership I felt most comfortable woirking with, explained that I had so much to put down and could afford such and such payments and they actually found a car that had been traded in the day before and I bought it. They knocked about $3000 off so we could afford it and DH is still driving it.

We don't usually buy new cars and you can find used ones out there that aren't junkers.

Suzanne

 

[princessmom29]

I would not lease unless there was literally no other option. You have to be super careful with them or there are lots of penalties at the end, and you essentially renting the vhicle. What about using the difference in what is owed and what the insurance pays to get something reliable as a stopgap until your situation improves? That was you would have a bit of a monthly cushion for emergencies rather than just getting by.

 

[wdwfan16]

I would try to make it work with just one car. I would pay off the small debt and bank the rest. When either of you gets a better job then I would buy another car.

 

[Praying Colonel]

Based on my experience when DH totaled our car, the insurance automatically paid off what was remaining on our loan, then deducted the amount for our deductible and sent us a check for the balance.

I took what was sent to me and went to the dealership I felt most comfortable woirking with, explained that I had so much to put down and could afford such and such payments and they actually found a car that had been traded in the day before and I bought it. They knocked about $3000 off so we could afford it and DH is still driving it.

We don't usually buy new cars and you can find used ones out there that aren't junkers.

Suzanne

This is what I would recommend. The amount owed on the note will almost certainly be paid to the finance company, and you'll receive a check for the remainder. If I were in your shoes I would take the remaining amount and purchase a used vehicle which you get checked out before buying. I would not borrow money for the replacement vehicle, and I definitely would not lease.

 

[robinb]

3. Take the insurance money and buy a junker to get us through until we are in a better employment situation, hopefully in 6 months or less.

I would recommend #3 since neither one of you have good jobs to make car payments.

 

[natenapril]

I would recommend #3 since neither one of you have good jobs to make car payments.

me too

 

[Kitzka]

i wuold pay off the note on the car and then get a used car with the reminder.

then use the $200 or so you would save (your current car payment) towards other bills, savings etc. just until you or DH gets a job.

Lara

 

[donalduck]

Here are the facts:

DH was in an accident last week (thankfully everyone is fine, no injuries). We have a 2006 Toyota Corolla. Tow truck driver for the auto body shop happened to be one of the workers filling in for the driver and he estimated that the car would probably be totaled by the insurance company. We are still waiting for the final word on that from insurance company. Based on blue book values (being conservative) I think we would get about $6,000 if they do decide to total it.

Some additional facts:
-We still owe about $2000 on the car, payment is $213 a month.
-We both have job issues. DH lost his job in Feb. He is working PT at Target and collecting unemployment. I lost my job last June and have been in a long term temp position since September. No word on if it will go perm anytime soon. I also work PT at a retail store. We have both been sending resumes out left and right and had a few interviews, but nothing has panned out yet.
-My car (2004 Ford Escape) is paid of with no major mechanical issues. Knock on wood.
-Due to my job loss (I was our breadwinner and now make about 50% of what I was making) we ate through our savings and currently just make enough to pay our bills. We have cut out pretty much all extras and made many positive budget changes.

Obviously we hope the car can be fixed because it is worth more to us than to the insurance company. Plus we really liked the car. But if they do total it, we are not sure what our best move would be given our job situation. While I would love to not have a car payment, we are comfortable with the $200/month we pay now. We could:

1. Take the inurance payment and pay off the car loan. Use remaining money for downpayment and try to get into a new car loan for about the same monthly payment. Probably could get another Corolla or something similar. We don't want to, but parents have offered to cosign if we can't get approved for loan. Would extend our payments out several years, but we would have a car to show for it at the end.

2. Lease a car. Several good lease options right now for about $200/month for a similar car. 36 month lease, $0 down, $0 deposit. We could take the insurance money to pay off corolla, cover the few lease fees and to pay off the one other small debt we have which would free up another $100/month. The remainder would go to savings along with that $100 month. Give us a little cushion with the unemployment. Not sure if we would need a cosignor to qualify for a lease, but again my parents are more than willing.

3. Take the insurance money and buy a junker to get us through until we are in a better employment situation, hopefully in 6 months or less.

I would pick number 3. You DON"T want to lease a car. You don't want to have anyone co sign for you also. That is bad. I would buy a junker car and then soon as your jobs get better then move up in car. Just save what your car payment would be and then pay cash for a better car.

 

[dawson5]

I would also go with the cheap used car and save the $200/mo to put into savings or some other bill. I would imagine your insurance might go down also.

One other thing, check with a repair shop on what it would cost to fix. The insurance might write it off as too expensive to repair but you might be able to fix it for less, especially if hubby can do some of the work himself. My husband paid $300 for the tow of a wrecked car. Girl seemed to think the car was worth more than what it was, abandoned it and is now fighting the insurance company of the person who hit her. Anyways, the car needed about $1500 to get it in working condition (including the tow). All damage was cosmetic, no frame damage or engine damage. My husband has a nice summer car for about $1500--it's a '00 red mustang convertible and worth about $7500 now.

 

[prncess674]

I took what was sent to me and went to the dealership I felt most comfortable woirking with, explained that I had so much to put down and could afford such and such payments and they actually found a car that had been traded in the day before and I bought it.

This is bad advice. You got suckered. Never let them know you can afford $X payment. They will just start tweaking the terms and interest rate to fit that. You need to negotiate the price and make sure it is a good deal for the car you are buying. Then determine if the financing offered by the dealership is acceptable. You may be better off going thru your credit union or bank and getting a better rate.

 

[akcire]

Since it sounds from your description like you need to have 2 cars, unless you can borrow one you will need a replacement car.

Leasing is a losers game, except for extremely specific situations.

That said, I will be the contrarian. I don't think buying a "junker" is a long term solution (plus the cost risk of junker-repairs). Transportation is going to be an ongoing need, and I would look for a long term solution even if it means having a car payment. You should be able to purchase a good used or even new car still under warranty with your down payment. You were making it work with your $200 car payment, and if you get a quality car your operating costs should remain relatively low.

Sometimes, I find that people on the budget board are so concerned with short-term debt elimination that they get tunnel vision. Debt elimination is key to wealth building, you will get no argument from me--however sometimes spending more today really works out, not to mention peace of mind that no one gets stranded. If you can buy an inexpensive new car and drive it for 10+ years the average operating cost per year will be relatively low.

Just my 2 cents.

 

[Shmily1]

Really good cars can be bought for not much money. I would definitely look around at the used cars in your area and see what I could get with just the insurance money left over. This would free up the $200/ month you currently pay to pay off the other bill quicker and as soon as you get a better job, you could get a different car if you didn't love the one you ended up with. Check craigslist and autotrader.

Don't do the lease! That's a bad program. DSS was a car salesman for a few years and hated to hear people ask for a lease cause he knew it would be bad for them in the end.

 

[Irin997]

5 years ago I paid $5500 cash for 1997 Honda Accord. Sure, in the past 5 years it has needed some work and right now it has 190,000 miles on it, but it is a fantastic little car and I love the fact that I do not have a car payment. It is allowing me to save up a down payment on a newer car for the next 1-2 years.

I say go with a used car. But just because it might be a $4k car doesn't mean it has to be a junker. Check out craigslist and see what is out there. Go for something like a Honda Civic or an older Toyota Corolla. You'll be surprised at what you can get.

 

[prncess674]

Agree that there you are only giving yourself two options: (1)Brand spanking new car or (2) junker.

There are plenty of options in between. You can save thousands of dollars buying a late model used car. Agree that I would look at Honda Civics.

 

[tar heel]

You can buy a lot more than a junker for $4,000. My DH, for example, drives a 1995 Camry with about 140,000 miles on it. If he sold it, he would be lucky to get $3,000. Our mechanic says it could easily run relatively trouble free for another 100,000 miles. The key with buying an older car is to get it thoroughly inspected by a trusted mechanic.

 

[torinsmom]

I second the idea of getting an independent quote of how much the car will cost to fix. I totalled my car once(20 years ago) and the insurance company offered me $2500 for the car. If I wanted to keep the car, they would give me $2200. I checked around and found a body shop that would fix the car for the $2200 I got and drove it for 10 more years. It was a 1984 Mustang and much more solid than newer cars I could have gotten for that price. I might still have it if a tow truck hadn't smashed into us and totalled it again. This time it was old enough that I just took the money.

Oh, and my BIL just totalled their 2001 CRV. Blue book value was around $3200, but the insurance is giving them $6500. It really depends on the insurance company what they use to come up with the amount.

Marsha

 

[Irin997]

Also, on a personal note, with the financial situation that you are in, there is no way I'd lock myself in another loan on a car when you are concerned about your combined current income. If things get stickier, the car payment would really strap you and then you could be facing repossession.

 

[PrincessBelle09]

Do not lease a car! According to Consumer Reports, leasing is the most expensive way to use a car. Your only real option is to take that $6,000, pay off the $2,000 still owed on the loan, and pay CASH for a car. I don't mean to sound harsh, but ya'll are in a tight spot with the job situations and you've got to do what makes sense financially. Leasing or buying a car you cannot currently afford just isn't an option.

 

[DCLbrideSept2009]

I vote for taking the money and paying CASH for another car. With $4000, you could get something decent, not a total junker. About 2 years ago, I bought a 1999 Honda Accord off Craigslist. Paid $5800 for it. Still have it. It's a great little car. My now DH bought a 1996 Nissan Maxima a couple years ago, also off Craigslist, for about $2600. Also a decent car. Our goal is to be debt free and never have debt again. We do currently have 2 car payments but wish we didn't and are working to pay them off ASAP. Then will only pay CASH for cars in the future. The idea is that you take X amount of money and buy a car. Put what you WOULD be paying for a car payment into savings every month (in your case, $200/month). In 10 months, you have another $2000. So you trade/sell your $4000 car that you're getting now (for probably a little less than you paid for it), add what you get for it to the $2000 you've saved and you now have an almost $6000 car. Keep saving the $200/month and then keep "upgrading" about every 10 months or so. No debt, no interest payments, etc.