[DJKapeesh]

Originally Posted by zx10guy

No it means, there are other things that go on in life. Like actually needing a car or wanting to buy something now versus later. Yes, there are times when I like to indulge in a want and not a need. My motorcycles are an indication of this want. I didn't buy them to do anything with my credit score. My spending habits are not driven primarily by increasing my credit score. There is this thing called the enjoyment factor. I know I have the means to make payments on this want. I chose not to wait till I have money saved up to buy it. I chose to use someone else's money at 1.49% to indulge. I chose to have a 5 year loan knowing full well I would pay it off well ahead of the loan term but it gives me flexibility to pay the minimum payment if I need to.

The only time I really cared about my credit score was when I was doing my paper work for my initial and periodic security clearance paper work, and when I bought my various homes. Other than that, I always know I will be approved for any revolving/consumer credit, auto loan...cocky I know.

ETA: I also bought my old Focus as a daily beater new. I didn't wait to save up the cash to buy it outright because I needed a car now due to my daily beater (a Cavalier Z24) blowing a head gasket. I decided not to put any more money in repairs into the car. And I did pay off this car in a year with zero down.

All good examples but I like to call it utility cost and I also believe in enjoyment factor.

But for her there is no enjoyments from this car and the utility cost is not worth $10000 in interest

[grieverr]

Originally Posted by davis449

...So this is how I broke it down to her and exactly what wouldn't happen under any circumstances:

2.) There was no way in hell I was going to sell\trade my nice DD car...



...We discussed things over the next year and we decided to sell my previous DD...

0_o
Um...yea, you showed her! j/k!

OP, The important thing is to learn from this and value each other as part of a relationship. You guys are a team. Good luck, I'm sure you guys will do just fine.

[zx10guy]

Originally Posted by DJKapeesh

All good examples but I like to call it utility cost and I also believe in enjoyment factor.

But for her there is no enjoyments from this car and the utility cost is not worth $10000 in interest

But that's if she takes the current loan to term. You're not focusing on other options. Which really are up to her to figure out if this is important enough for her to fix. Which also ties into your relationship. She can increase the amount she pays a month. I don't know what she has left over after all the monthly bills are paid. But if there is any extra, she can pay more then the minimum payment to effectively lower the overall interest paid. If she doesn't have any money left over then you can cut her some slack in the 50/50 joint bills so she can apply that money to the car payment. This allows you to help her out but also not put you on the hook legally for anything related to the car. She can pick up a part time job to increase her income. If there is discretionary expenditures, she cut or eliminate those to increase the amount she can pay.

In the end, this is going to be painful. You focus on the interest rate of the auto loan but don't focus on the fact there's the upside down factor of debt from the previous car that is rolled into the current loan. None of that is going to easily go away. Some how that negative equity has to be paid off....no matter if you get a lower interest or sell off the car.

[shadow191]

It's not a game, credit scoring is a legit way for banks to judge whether or not someone will pay them back. There are very few ways to truly game to credit scoring system so it's relatively accurate. FICO changes their standards all the time to make sure people aren't able to trick them. Can you influence your score mildly? Sure. Can you make substantial enough changes that would influence credit decisions? Much less likely.

For the most part, you start out with a clean slate. Just about everyone can get credit at first without any history. Your rates may not be awesome, but you can get credit cards and/or a car loan even when you're young. It's people who have made significant financial mistakes that get dinged and claim the system is unfair. You can actually have a high credit score with minimal credit history, a few years of on time payments will do it. Lots of people are literally still in college with 780+ credit scores. Conversely, there are plenty of people with 20 years of credit history and scores in the 500's.

800+ isn't that big of a deal either.

Dave Ramsey's philosophy has it's place, but so does the responsible use of credit. Most of Dave Ramsey's followers are trying to dig themselves out from a hole which is why cash only and his debt paying methods work. But if you're not in a hole, why not use credit responsibly? If I can earn more on my cash than what I pay on interest, why wouldn't it make sense to take the loan? Not to mention having cash on hand gives you a lot more flexibility than sinking it all into an asset.

Back on topic, why not just keep driving the car and pay it off as fast as you can? 15% is a terrible rate, but she knew what they payments were getting into it. The faster you pay it off, the less the total finance cost. If you borrow the money from her dad, use it to pay down the loan and keep the car. If you take the money, pay the loan down and then sell it, you're basically keeping debt without the associated asset. At that point, you might as well let them repo the car, they'll bill you for the difference between loan and value and you still have no car. Only difference would be the repo messes up her credit even more. Selling an upside down or underwater asset is almost never the correct course of action unless there's no other choice. Right now your losses are pretty much on paper. The market value of the car isn't relevant - the car still does what she bought it for. If you sell the car, you've basically realized the paper losses on that car. At some point, the depreciation is going to level out and assuming she can keep paying down the loan, she won't be upside down anymore.

At this point, swapping cars again is just going to dig the hole even deeper. You've already rolled 2 cars worth of depreciation into this loan.

Originally Posted by DJKapeesh

Credit is a dog chasing a tail.

I must borrow money to build a credit score.
I need a credit score to borrow money.

800+ credit score means I have payed 100k or more in interest to get that score. Life should be more than this game we play with the banks

[zx10guy]

Originally Posted by shadow191

It's not a game, credit scoring is a legit way for banks to judge whether or not someone will pay them back. There are very few ways to truly game to credit scoring system so it's relatively accurate. FICO changes their standards all the time to make sure people aren't able to trick them. Can you influence your score mildly? Sure. Can you make substantial enough changes that would influence credit decisions? Much less likely.

For the most part, you start out with a clean slate. Just about everyone can get credit at first without any history. Your rates may not be awesome, but you can get credit cards and/or a car loan even when you're young. It's people who have made significant financial mistakes that get dinged and claim the system is unfair. You can actually have a high credit score with minimal credit history, a few years of on time payments will do it. Lots of people are literally still in college with 780+ credit scores. Conversely, there are plenty of people with 20 years of credit history and scores in the 500's.

800+ isn't that big of a deal either.

Dave Ramsey's philosophy has it's place, but so does the responsible use of credit. Most of Dave Ramsey's followers are trying to dig themselves out from a hole which is why cash only and his debt paying methods work. But if you're not in a hole, why not use credit responsibly? If I can earn more on my cash than what I pay on interest, why wouldn't it make sense to take the loan? Not to mention having cash on hand gives you a lot more flexibility than sinking it all into an asset.

Back on topic, why not just keep driving the car and pay it off as fast as you can? 15% is a terrible rate, but she knew what they payments were getting into it. The faster you pay it off, the less the total finance cost. If you borrow the money from her dad, use it to pay down the loan and keep the car. If you take the money, pay the loan down and then sell it, you're basically keeping debt without the associated asset. At that point, you might as well let them repo the car, they'll bill you for the difference between loan and value and you still have no car. Only difference would be the repo messes up her credit even more. Selling an upside down or underwater asset is almost never the correct course of action unless there's no other choice. Right now your losses are pretty much on paper. The market value of the car isn't relevant - the car still does what she bought it for. If you sell the car, you've basically realized the paper losses on that car. At some point, the depreciation is going to level out and assuming she can keep paying down the loan, she won't be upside down anymore.

At this point, swapping cars again is just going to dig the hole even deeper. You've already rolled 2 cars worth of depreciation into this loan.

+100000

This.

In the end cash is king. This is also why I disagree with Suzie Orman. She pushes the idea of having your house paid for. I disagree. Having all my cash tied up into an asset with poor liquidity other than being able to take out a equity loan against it is not something I like. Especially since I've been fortunate enough to lock in at a 30 years fixed rate of 3.75% for my primary residence and 3.25% at 30 years fixed for my vacation property. I choose to use that money I would have sunk into these properties for stock investments.

[DJKapeesh]

Originally Posted by shadow191

It's not a game, credit scoring is a legit way for banks to judge whether or not someone will pay them back. There are very few ways to truly game to credit scoring system so it's relatively accurate. FICO changes their standards all the time to make sure people aren't able to trick them. Can you influence your score mildly? Sure. Can you make substantial enough changes that would influence credit decisions? Much less likely.

For the most part, you start out with a clean slate. Just about everyone can get credit at first without any history. Your rates may not be awesome, but you can get credit cards and/or a car loan even when you're young. It's people who have made significant financial mistakes that get dinged and claim the system is unfair. You can actually have a high credit score with minimal credit history, a few years of on time payments will do it. Lots of people are literally still in college with 780+ credit scores. Conversely, there are plenty of people with 20 years of credit history and scores in the 500's.

800+ isn't that big of a deal either.

Dave Ramsey's philosophy has it's place, but so does the responsible use of credit. Most of Dave Ramsey's followers are trying to dig themselves out from a hole which is why cash only and his debt paying methods work. But if you're not in a hole, why not use credit responsibly? If I can earn more on my cash than what I pay on interest, why wouldn't it make sense to take the loan? Not to mention having cash on hand gives you a lot more flexibility than sinking it all into an asset.

Back on topic, why not just keep driving the car and pay it off as fast as you can? 15% is a terrible rate, but she knew what they payments were getting into it. The faster you pay it off, the less the total finance cost. If you borrow the money from her dad, use it to pay down the loan and keep the car. If you take the money, pay the loan down and then sell it, you're basically keeping debt without the associated asset. At that point, you might as well let them repo the car, they'll bill you for the difference between loan and value and you still have no car. Only difference would be the repo messes up her credit even more. Selling an upside down or underwater asset is almost never the correct course of action unless there's no other choice. Right now your losses are pretty much on paper. The market value of the car isn't relevant - the car still does what she bought it for. If you sell the car, you've basically realized the paper losses on that car. At some point, the depreciation is going to level out and assuming she can keep paying down the loan, she won't be upside down anymore.

At this point, swapping cars again is just going to dig the hole even deeper. You've already rolled 2 cars worth of depreciation into this loan.

Makes sense but not sure where you guys are hearing 2 cars of depreciation? She has 1 car and didn't get the WRX. The sales person simply ripped them a new ars with the price and it ended up coming out to 18k - 19k for a car advertised at 14999.

Originally Posted by zx10guy

+100000

This.

In the end cash is king. This is also why I disagree with Suzie Orman. She pushes the idea of having your house paid for. I disagree. Having all my cash tied up into an asset with poor liquidity other than being able to take out a equity loan against it is not something I like. Especially since I've been fortunate enough to lock in at a 30 years fixed rate of 3.75% for my primary residence and 3.25% at 30 years fixed for my vacation property. I choose to use that money I would have sunk into these properties for stock investments.

The only real argument with this is by paying off a 3.75% loan you actually see 3.75% return on that money without any risk. The difference is you may earn more in stock but the risk is always there. Baby boomers bubble and unstable economies means you can loose at any time before you pull it out to see the gains.

[shadow191]

Sorry, I misread it. Saw the multiple cars in your OP and then saw others mention another upside down car. But really the point is the same.

Yes, if you pay down debts, your return is effectively what the interest rate is risk free (taking out consideration of tax breaks). But, if you've already got enough cash reserves, then taking on risk in the market and getting higher returns can be a good thing. Everyone has a different risk/reward threshold though. I'd rather have my money invested than locked up in an illiquid asset like a house. Even if I'm down 30% in the markets and forced to sell, at least I can get cash quickly. If I need to get cash out of my home, I need to get a HELOC or refi. So paying off a mortgage at 3.5% before tax deductions which lower the effective rate doesn't make sense for me. But my parents were much more risk averse and paid off their house in like 4 years just to eliminate all debt.

Originally Posted by DJKapeesh

Makes sense but not sure where you guys are hearing 2 cars of depreciation? She has 1 car and didn't get the WRX. The sales person simply ripped them a new ars with the price and it ended up coming out to 18k - 19k for a car advertised at 14999.



The only real argument with this is by paying off a 3.75% loan you actually see 3.75% return on that money without any risk. The difference is you may earn more in stock but the risk is always there. Baby boomers bubble and unstable economies means you can loose at any time before you pull it out to see the gains.

[ASBSECU E93]

My .02.....

Refinance the car to a better rate with co-signer (only option to reduce the long term total costs of the current car).

DON'T TRADE THE CAR - first rule when your in a hole...STOP DIGGING.

DON'T SELL THE CAR....what are your realistic options to replace the car...?

Sit sown and build a monthly budget that has a fiscally responsible plan to retire higher rate debt first, then other debt - and STICK TO IT.

Rebuilding credit takes time....and contrary to some comments, 800+ credit scores are very powerful with respect to being able to borrow $$ at a significantly favorable rate (Even 0% over short term periods can be used to your benefit) - HOWEVER the ability to manage short term credit to your benefit is a responsibility.

Sounds like this person will be your life partner - you need to take control of this situation or it'll be a lifetime of stress with regard to ability to secure a basic and commonly acknowledged financial tool - the ability to borrow.

[DJKapeesh]

Originally Posted by ASBSECU E93

My .02.....

Refinance the car to a better rate with co-signer (only option to reduce the long term total costs of the current car).

DON'T TRADE THE CAR - first rule when your in a hole...STOP DIGGING.

DON'T SELL THE CAR....what are your realistic options to replace the car...?

Sit sown and build a monthly budget that has a fiscally responsible plan to retire higher rate debt first, then other debt - and STICK TO IT.

Rebuilding credit takes time....and contrary to some comments, 800+ credit scores are very powerful with respect to being able to borrow $$ at a significantly favorable rate (Even 0% over short term periods can be used to your benefit) - HOWEVER the ability to manage short term credit to your benefit is a responsibility.

Sounds like this person will be your life partner - you need to take control of this situation or it'll be a lifetime of stress with regard to ability to secure a basic and commonly acknowledged financial tool - the ability to borrow.

Budget is already been made for months now and she doesn't really have any wiggle room due to payment amount vs income.

[chris82]

Originally Posted by JasonCSU

Paying for an item in cash up front is not always the best action even if you have the means to do so. With the incredibly low rates available on auto loans, many people will still finance a car even if they have the cash because that cash may be invested elsewhere and provide a return greater than the cost of the interest on the loan.

Exactly, it is called leveraging!

[zx10guy]

Originally Posted by DJKapeesh

Makes sense but not sure where you guys are hearing 2 cars of depreciation? She has 1 car and didn't get the WRX. The sales person simply ripped them a new ars with the price and it ended up coming out to 18k - 19k for a car advertised at 14999.



The only real argument with this is by paying off a 3.75% loan you actually see 3.75% return on that money without any risk. The difference is you may earn more in stock but the risk is always there. Baby boomers bubble and unstable economies means you can loose at any time before you pull it out to see the gains.

I misread too. I thought there was negative equity in the BMW that got rolled over to the Focus.

The real argument with the paying off mortgage versus investing in the stock market is very few people build any substantial wealth to live off of just saving the cash.

[zx10guy]

Originally Posted by JasonCSU

Paying for an item in cash up front is not always the best action even if you have the means to do so. With the incredibly low rates available on auto loans, many people will still finance a car even if they have the cash because that cash may be invested elsewhere and provide a return greater than the cost of the interest on the loan.

Another +1. Many very wealthy people and corporations do exactly this.

[E90Alex]

Do you guys think you are living above your means?

It seems like it if you guys are both working professionals but cannot come together with either the 16k payoff amount or at least the 6k negative equity without needing a loan....