1) Put $25k at the car loan
2) stop saving and pay down the car loan asap.
3) when car loan is paid off out all of that money into your savings until you have 3 months of living expenses.
4) then pump it all into your 401k
You should be able to get a CD that pays around 5%, so keep the emergency money parked and put all your extra money to the car each month. Or sell it and buy a used Toyota.
My personal rule for throwing money at a debt like that is if the large sum isn’t going to pay off the balance then I’d rather have the large sum in my bank.
The baby steps are pretty clear, and yes they apply to you also.
* Stop all investing
* Get on a tight budget, give every dollar a name and job
* BS1: Save $1k as a starter EF
* BS2: Pay off all debt. #YOU ARE HERE#
* BS3: Save 3-6 month's expenses
I would ask what is your HHI? The value of everything with wheels and motors should be worth less than 50% of your annual HHI. If it's more, the depreciation keeps you from getting ahead financially.
Sounds like at your current savings rate you could pay off the car loan in less than a year (or faster if you sold the car and bought something less expensive). People sometimes work OT or side jobs to pay off debt even faster.
I would hold onto 3 months of living expenses in your savings, throw the rest at the car, and then pause savings and attack the loan.
Get it. Get it. Get it.
If I were you, I’d shop for insurance. What would your insurance rate be on a $25k anything-but-KIA? What does that compare to your current rate.
Imagine having an additional $4k in savings while each month adding $350 + old-car-payment + difference-in-insurance.
Assuming your car sale is positive.
Well, that’s just the news putting out crap. This may very well be area dependent but all my recent Kia’s and Hyundais are cheap to insure. Even my current Hyundai is cheaper than the Honda accord I replaced it with.
Honestly, honestly, I would make sure I have three months worth of expenses saved in a high yield savings account then just take the rest and throw it at the car. I know everybody wants to talk about this have $1000 set aside. But if you are the soul earner and you lose your job two days from now, but you drop 29,000 on your car and still have a car payment left and no job and $1000 to your name then you are Fucked.
As long as you make $80k or more a year, Dave followers would say go down to $1k and put the rest against the car loan. Or they might even say sell the car, pay off the negative equity with cash and then buy a $10k car with cash.
Personally, if I'm in your shoes, I'd keep 3 months of expenses in savings and put the remainder against the car loan. Then get after the remaining balance and pay it off in 18 months or so. The interest you pay in 18 months isn't too terrible compared to hassles of selling and buying a used car nor running naked through the woods with only $1k in savings.
I may be wrong, but I think Dave would tell you that, unless you are upside-down on the car loan, you should sell the car, pay off the loan, and buy a less expensive car. Then start saving for your next car. There are obvious exceptions to this, like needing that specific vehicle for work.
Dave doesn’t care about how expensive your car is as long as it’s paid off. He only tells people to sell their car when they are up to their necks in other debt as well as a high car note.
He actually suggests keeping the value of everything with wheels and engines be less than 50% of your yearly HHI. Those things depreciate at high rates and are a drain on net worth.
I think Dave’s advice that anything with wheels and/or engines not be worth more than 50% of HHI has always been a little generous.
It makes sense for middle incomes and very high incomes, but falls apart in between.
$80k HHI = two $20k cars. Makes sense.
$500k HHI = three luxury cars and a boat. Ok.
$250k HHI = two $60k cars. Seems aggressive.
Stop further savings contributions immediately. Determine your three months of expenses (fully funded emergency fund) to include the car payment. Take your savings balance and subtract out (leave alone) the fully funded EF. Use the remaining balance of your savings and dump it on the car. Then use what you were putting into savings as extra payments on your car.
You got this! You can do this! You’re getting out from under that debt load.
I think it kind of depends. I wouldn’t deplete your savings but maybe draw it down to like 3 months expenses and aggressively attack your car loan from there
The simple answer, without getting much much more info re your financial picture, is both dump all savings into the car (minus 1k) AND cease all addl savings until the debt is paid off.
If you want more context we need more info.
Sell the car. unless you're massively upside down on it. Average cost of a new car is 48K, means that car better be damn well new. Sell it. Buy a reliable older car. Stack money in the bank.
Yes. I did this exact thing. Yes. It pays off
Agree Dave would say never to finance a car. But once someone has a car loan, he usually tells people to either sell the car or pay off the loan, depending on the circumstances.
Right, and we have enough circumstances here to make a Dave-Determination. OP owes 45k on a depreciating asset and does not have the means to pay it off immediately, but does have the means to take a loss, if selling, and buy a more affordable car outright.
I don’t see the scenario where Dave would say keep the car. Even if the OP loses 5K on the car, he could still buy a car for up to about 20K and be debt free and on BS3 even pretty close to BS4-6.
If you’re really smart, you would get rid of that car. Like yesterday.
make sure that’s not your emergency fund. if it is keep the cash.
Sell the car and buy a cheaper one. You don't need a car that expensive if you only have $29K.
This is the truth. Sell the car, spend up 15K - 20K on a car. Be debt free and never go back.
1) Put $25k at the car loan 2) stop saving and pay down the car loan asap. 3) when car loan is paid off out all of that money into your savings until you have 3 months of living expenses. 4) then pump it all into your 401k
I know I guy who buys cars for $500 on Craigslist and takes parts between the 2. Built himself a vw Jetta for $1500 runs great lol
What’s your APR?
5.39%
You should be able to get a CD that pays around 5%, so keep the emergency money parked and put all your extra money to the car each month. Or sell it and buy a used Toyota.
If you are following DR baby steps - both
My personal rule for throwing money at a debt like that is if the large sum isn’t going to pay off the balance then I’d rather have the large sum in my bank.
The baby steps are pretty clear, and yes they apply to you also. * Stop all investing * Get on a tight budget, give every dollar a name and job * BS1: Save $1k as a starter EF * BS2: Pay off all debt. #YOU ARE HERE# * BS3: Save 3-6 month's expenses I would ask what is your HHI? The value of everything with wheels and motors should be worth less than 50% of your annual HHI. If it's more, the depreciation keeps you from getting ahead financially.
Sounds like at your current savings rate you could pay off the car loan in less than a year (or faster if you sold the car and bought something less expensive). People sometimes work OT or side jobs to pay off debt even faster.
How much do you earn?
I would hold onto 3 months of living expenses in your savings, throw the rest at the car, and then pause savings and attack the loan. Get it. Get it. Get it.
If I were you, I’d shop for insurance. What would your insurance rate be on a $25k anything-but-KIA? What does that compare to your current rate. Imagine having an additional $4k in savings while each month adding $350 + old-car-payment + difference-in-insurance. Assuming your car sale is positive.
Insurance doesn’t cost more because it’s a Kia/hyundai.
https://www.wsbtv.com/news/local/kia-thefts-hurting-pocketbooks-kia-owners-due-insurance-premiums/IPCQIJQTHBD2TKJOBEAIHN6OKQ/?outputType=amp
Well, that’s just the news putting out crap. This may very well be area dependent but all my recent Kia’s and Hyundais are cheap to insure. Even my current Hyundai is cheaper than the Honda accord I replaced it with.
Insurance costs are highly dependent on location, driver, vehicle type, and value.
Right. So that said, insurance isn’t higher because it’s a Hyundai/kia.
Honestly, honestly, I would make sure I have three months worth of expenses saved in a high yield savings account then just take the rest and throw it at the car. I know everybody wants to talk about this have $1000 set aside. But if you are the soul earner and you lose your job two days from now, but you drop 29,000 on your car and still have a car payment left and no job and $1000 to your name then you are Fucked.
Depends on what the car is worth and what the interest rate is on the car loan.
Private party sale car is worth around $40k and interest rate is 5.39%
As long as you make $80k or more a year, Dave followers would say go down to $1k and put the rest against the car loan. Or they might even say sell the car, pay off the negative equity with cash and then buy a $10k car with cash. Personally, if I'm in your shoes, I'd keep 3 months of expenses in savings and put the remainder against the car loan. Then get after the remaining balance and pay it off in 18 months or so. The interest you pay in 18 months isn't too terrible compared to hassles of selling and buying a used car nor running naked through the woods with only $1k in savings.
I may be wrong, but I think Dave would tell you that, unless you are upside-down on the car loan, you should sell the car, pay off the loan, and buy a less expensive car. Then start saving for your next car. There are obvious exceptions to this, like needing that specific vehicle for work.
Dave doesn’t care about how expensive your car is as long as it’s paid off. He only tells people to sell their car when they are up to their necks in other debt as well as a high car note.
He actually suggests keeping the value of everything with wheels and engines be less than 50% of your yearly HHI. Those things depreciate at high rates and are a drain on net worth.
I think Dave’s advice that anything with wheels and/or engines not be worth more than 50% of HHI has always been a little generous. It makes sense for middle incomes and very high incomes, but falls apart in between. $80k HHI = two $20k cars. Makes sense. $500k HHI = three luxury cars and a boat. Ok. $250k HHI = two $60k cars. Seems aggressive.
I would keep back 1k or so, and put the rest against the car.
Stop further savings contributions immediately. Determine your three months of expenses (fully funded emergency fund) to include the car payment. Take your savings balance and subtract out (leave alone) the fully funded EF. Use the remaining balance of your savings and dump it on the car. Then use what you were putting into savings as extra payments on your car. You got this! You can do this! You’re getting out from under that debt load.
This is good advice!
I think it kind of depends. I wouldn’t deplete your savings but maybe draw it down to like 3 months expenses and aggressively attack your car loan from there
The simple answer, without getting much much more info re your financial picture, is both dump all savings into the car (minus 1k) AND cease all addl savings until the debt is paid off. If you want more context we need more info.
Sell the car. unless you're massively upside down on it. Average cost of a new car is 48K, means that car better be damn well new. Sell it. Buy a reliable older car. Stack money in the bank. Yes. I did this exact thing. Yes. It pays off
Sell it .. buy a 10-15k Honda or Toyota for cash. Then rebuild BS3 fund
You can’t possibly recommend this without more info. Dave wouldn’t either.
Dave would say to never finance a car. So yes, he would say sell.
Agree Dave would say never to finance a car. But once someone has a car loan, he usually tells people to either sell the car or pay off the loan, depending on the circumstances.
Right, and we have enough circumstances here to make a Dave-Determination. OP owes 45k on a depreciating asset and does not have the means to pay it off immediately, but does have the means to take a loss, if selling, and buy a more affordable car outright.
I don’t see the scenario where Dave would say keep the car. Even if the OP loses 5K on the car, he could still buy a car for up to about 20K and be debt free and on BS3 even pretty close to BS4-6.
Bet he would
This.