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Buy new car to be safe, or pay-off remaining CC debt?

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jnb150
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Buy new car to be safe, or pay-off remaining CC debt?  Reply with quote  

Here's the quick breakdown:

I have 20k in CC debt, and currently have roughly 1600/month in un-allocated funds, and the ability to pay off at least 1k/month toward the CC debt. Meaning it would take roughly 20 months to be CC debt free.
I only have 12 months to do this though because we're expecting to have to put a child into daycare come next August, and our cash flow is going to be bottle-necked. That 1k/month I have to pay off CC debt is going to dry up very quick.

Here's my issue:

I have a 5 year old Subaru that's no longer under warranty, but paid off. I've had to have the entire engine and brake lines replaced under recall, and the dependability rating of this specific vehicle isn't very high. It's a gas guzzler, and now there's some heavy rattling noises when driving from inside the engine compartment.
The car still has a trade in value between 13k-14.5k. If I were to trade this vehicle in, and purchase a new Honda SUV with an extended warranty, the payments would be around $300/month, but it would also save me $300-$400/year with gas savings from higher mpg. It also has significantly higher safety ratings than my current vehicle.

So do I keep this paid off vehicle until the wheels fall off, and hope there are no other major issues? Or upgrade to a new vehicle under warranty, and get maximum trade in value for my money pit of a Subaru?

Is the $300/month on a new car payment, better off spent paying down debt? What are the risks rewards? My fear is that my current vehicle dies on me before I get rid of it, it loses trade value, and I'm ending up paying full price for a new car. I really don't like buying used when considering my families safety.

Thanks for help in advance!
Post Fri Aug 04, 2017 3:45 pm
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oldguy
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quote:
Buy new car to be safe,
It also has significantly higher safety ratings than my current vehicle.
when considering my families safety


I would buy the new Honda - or Toyota. Here's why.

Normally I would never trade a 5-year-old car, but a total engine replacement means that local mechanics have needed to remove many things - hood, radiator, wiring, accessories. 'Manufacturability" is a big part of a car's design, the car is assembled in a specific order, by specific assembly line tooling. Whenever you deviate from that, there are often unintended outcomes (such as your heavy rattling noises).

In general "safe" is one of the most common rationalizations that is used by young families to get new cars. Literally all modern cars are "safe" - you have to go back 20 or 25 years to find a car that doesn't have 'crash' frames, air bags, shoulder belts, electronic ignition, fuel injection, lock-outs to prevent hitting reverse while driving, yada. So don't pay much attn to safety ratings.

Re warranties/extended warranties. You need to rethink your logic. The EWs are major profit centers - and if they are getting a huge markup, they are obviously a bad deal for the consumer. Surely you can self-insure your car repairs? (BTW your engine and brake lines were covered under recall, the warranty didn't apply). The self-insure logic is true for many things, never buy warranties for appliances, AC, furnaces - you need to self-insure those.

We buy new cars and keep them for about 200,000 miles. All modern cars will provide 200,000 miles of trouble-free service, especially the asian cars. We traded our last Toyota at 205,000 - so I don't pay attn to resale value, they have very little value at 205k and at age 12. (Before I read your post, I would have put Subaru in the 'good' category, we see so many of them in the Ski Parking lots).

In your case, I would buy the new car with zero down payment, ie finance 100% including tax & lic. You'll have that money borrowed for about 2% to 3% for 5 or 6 years. And apply your $13k to $14k to paying off the $20k CCs (they are probably revolving loans in the >12% range?) That would be better use of your capital that borrowing only $17k on the car.
Post Fri Aug 04, 2017 6:12 pm
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jnb150
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You're a genius! I never thought to take the trade in value and pay off my CC debt.

I'm not familiar with getting rid of a car using private party methods. Is it possible to sell the car to the dealership at whatever they value the trade in for?

If I constantly roll my CC over into 0% promos (which i try to do when 18 month 0% promos come up), would I still be saving money by applying my old car's value to the credit card debt, rather than the new car?
Post Fri Aug 04, 2017 6:31 pm
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oldguy
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quote:
would I still be saving money by applying my old car's value to the credit card debt, rather than the new car?


Probably - most of the Balance Transfers cost 3% or more, and they have to be repeated annually. You can probably get a car loan for under 3%/yr. Normally you'll get better rates with a collateralized amortized loan (cuz the lender has leverage, s/he can repossess the car. )

One time a dealer gave me a check for my trade-in. But in general, you'll probably do better with a private sale - craigs list, etc. Or sell it at Carmax. In my case, my 12 yr-old, 200k mile cars are only worth $3k or $5k - so I don't spend a lot of time optimizing the deal, I concentrate on negotiating the price of the new car.
Post Fri Aug 04, 2017 9:32 pm
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jnb150
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I was able to get a 3% loan on the new car and got a pretty competitive price for the trade-in. The dealership cut me a check on the spot.

Thanks for your help!!! You really helped me out a lot!
Post Mon Aug 07, 2017 12:58 pm
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oldguy
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Great!
Smile
Post Mon Aug 07, 2017 7:53 pm
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Shalonxx
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Phenomenon One Communications Ltd have launched their Crowd  Reply with quote  

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Post Sat Aug 19, 2017 8:23 pm
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Wuveth
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You can buy used car, and pay-off remaining CC debt.
Post Tue Nov 14, 2017 9:50 pm
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GeorgeCarpenter
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I also prefer used cars. USA have good brands.
Post Wed Nov 15, 2017 11:37 am
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Tresdin
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I've been looking for Jeep Grand Cherokee in Canada ( they are rather expensive here) and found out variant that it's possible to import a good one via https://clearit.ca/online-customs-brokers from U.S to Toronto. Price of service not big, so I think I will use it!
Post Wed Nov 15, 2017 1:19 pm
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lantranhana
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It can be hard to figure out the best way to pay off credit card debt, especially if ... is it better to just pay off the remaining balance, or continue to make on-time payments?
Post Mon Nov 20, 2017 10:17 am
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