Car Question for a friend

**dianne9106** · 02-08-2011, 03:05 PM

Ok - I have a friend that is getting into DR - actually I have had a lot of friends that do it, but this friend is kind of at a turning point. They have two vehicles that they owe money on - a 2010 VW Jetta Diesel and a Lux SUV (VW I think). They only owe $14K on the SUV and I think $27K on the Jetta - they are upside down on the Jetta from a bad choice before. They have gotten both cars appraised locally and were going to trade them both in, but the husband decided it would be silly to trade in his car on something cheaper and then be even more upside down on an even cheaper car since the the balance owed on the Jetta would be applied to whatever else they purchased. He is not really in a position to get a $1K beater since he has a two hour round trip commute on a daily basis and no mechanical skills or time. They are talking about trading in the SUV and then buying something a lot cheaper so it's an even trade = trade her SUV in, pay off the note and then use the other funds to buy herself something dependable. I personally think she should get a $1k beater, but she is worried about it breaking down, not being safe for the kids, etc.... It's something she would have to drive daily for preschool and other activities. I think they make pretty decent money but have their car debt and maybe one other debt. I don't want to come out and ask all of their debts since we are not that close and it can be awkward. I know that being upside down on the Jetta is what is hurting them in terms of attacking their snowball quickly. She has her eye on a van, but would have to pay $2K over their trade in to call it even - which seems silly to do when they are trying to get out of debt and then they are paying for an older car when they are trading in a newer car.... Ugh! Any advice would be great! TY!

**Greebo** · 02-09-2011, 08:24 AM

If they owe 27k on a Jetta and can sell it and buy a reliable but not too expensive used car - say for around $4,000, and end up with maybe a total of $12,000 in debt paying off the Jetta and buying said used car, they are still $15k BETTER OFF THAN BEFORE.

Put that in DH's ear.

**dianne9106** · 02-09-2011, 09:07 AM

Originally Posted by Greebo

If they owe 27k on a Jetta and can sell it and buy a reliable but not too expensive used car - say for around $4,000, and end up with maybe a total of $12,000 in debt paying off the Jetta and buying said used car, they are still $15k BETTER OFF THAN BEFORE.

Put that in DH's ear.

That's a good idea and I will suggest that. What is your opinion on getting rid of the SUV? I remember that DR said something about how fast you can pay off a car vs if to sell it. I think they can pay it off, but I am getting the impression they want to attack their snowball a little faster.

**Greebo** · 02-09-2011, 09:19 AM

DR's rule of thumb is that if your car debt is less than 50% of your annual income and you can pay it off in 2 years in the normal snowball, you can keep it.

**Josephhgoins** · 02-09-2011, 12:24 PM

YOu are assuming they did not finance the car through the the car lot or bank. If they financed it they will have to pay off the note in full before they can have access to the title to sell it.

If it were me, I would try to sell the SUV, if it is worth more than they owe and then buy the beater as you suggest. Keep in mind, they can find a reliable beater for 4K, just may not be as pretty as they hoped.

I think they are tied to the jetta until the bitter end.

been there and done that myself.

**Greebo** · 02-09-2011, 12:30 PM

Originally Posted by Josephhgoins

YOu are assuming they did not finance the car through the the car lot or bank. If they financed it they will have to pay off the note in full before they can have access to the title to sell it.

Not a problem - you can get a bill of sale w/o the title, then use the bill of sale and payment from the buyer plus the financing cash to release the title for sale.

Occurs all the time.

**dianne9106** · 02-09-2011, 02:50 PM

Originally Posted by Greebo

Not a problem - you can get a bill of sale w/o the title, then use the bill of sale and payment from the buyer plus the financing cash to release the title for sale.

Occurs all the time.

Oh WOW! I never knew that! I was kinda of sure something worked like that - but I wasn't sure.
I am not sure what they are going to do. Her DH and my DH are friends, so I will keep passing on the info through both. I am not sure they are going to be tee-totaler DR fans - but at least they are doing something for their future and trying to change their family tree.

**Greebo** · 02-09-2011, 03:10 PM

Just remember - it's not your finances, it's theirs.

Keep your boundaries intact.

**dianne9106** · 02-11-2011, 03:47 PM

Well a little update. The wife has agreed to let her SUV go and get a used van that is dependable even if it's older and higher miles. The husband is going to keep his Jetta for now and they will start doubling up on their payments until they are no longer upside down and have some cash set aside for a decent $4K car, plus any extra money from the SUV will go on the Jetta and then they should have a good start on paying it off. They did mention that gas was starting to eat them up with the SUV since it takes almost $100 to fill it up with premium~!!! So perhaps this will work out better both now and later!
Thank you all for your help. Just talking it through here was helpful, since it kept me from being in their business and being a busy body with them.