What should I do?

[benita]

Hello. I have been lurking for a long time but this is my first post. I currently have a car loan balance at around $6000. My car would probably sell for $4800. My question is should I try to sell it, take the loss and purchase a very cheap used car for cash. I can afford the monthly payments ($197.30) but the insurance is expensive. My car is classified as a sports car although it is a 4 door sedan. Full coverage runs me roughly $160 per month. I was able to pay off this year's policy with a cash windfall. My budget is very tight and come October I will have to figure out how to pay my insurance. What would you do?

Thanks in advance
Benita

[AmyBoz]

I'd keep the car, but start saving for the insurance payment now. Set aside a bit of money each week or month and save up so that you are able to make the payment in October. Cut corners everywhere you can and keep the car.

[Mojjo]

Well, since you would still have an insurance payment (though less), a car payment, and then be upside down on the sale...I would probably stick with the current car and shop for rates. I would also start looking at my budget again.

Good luck!!!

[pkellyc]

$160 a month doesn't seem that high to me. I insure 4 drivers and 3 cars in CT cost per month? $470 And that is for safe drivers. If my girls get their own insurance it will run them at least $200 a month.

[annertak]

Wow, the insurance seems really high to me. I pay $2500 per year for 4 vehicles, four drivers, Dh, me, DD is 16 & DS is 20.

I, too, would keep the car, though, as long as it is reliable & big enough for everything you need it to be.

[Darlene]

I agree with the ladies & wonder if taking a defensive driving course (1 day course) would reduce your premiums. Costs about $30 -$40 and will give you a reduced rate for 3 years I think.

[couponchic]

I would keep the car for now, too. How would you pay cash for a used car if you don't have enough to pay the car loan off? Maybe you should shop around with the different insurance agencies and see if you can get a cheaper rate. Find out if you can raise the deductible and in turn, lower the insurance payment a bit. Also, I don't know if you own your home or rent, but my insurance company gives us a discount for having all (home, autos, boat) of our policies with them. Just some options to think about. Good luck with whatever you decide.

[Paquita]

The insurance seems high to me, also. DH and I pay $116 per month for two cars and renters insurance. I was thinking about getting rid of my car and buying something cheap but I am upside down in my loan too. Better for me too keep the car and make the payments somehow.

[Valerie in WA]

A big part of auto insurance cost is your 'market' - i.e. are there a lot of thefts and accidents within your zip code? If you're in a metro area, the answer is probably yes.

As to your original question, Benita, I suggest you do some research (if you haven't already) on used cars. www.edmunds.com is a good site. Once you've selected a couple of potential used cars (hopefully you'll be able to find the year, make & model actually for sale in your community), ask your insurance agent for a quote. If the insurance is significantly cheaper it may be worth it to sell your car.

The other consideration is: do you have the cash to pay off the car loan (the approx $1200 over what you would get for it) and purchase another car?

You might want to see if you can refinance your car loan for a lower interest rate. If you did so, you would get out from being upside down more quickly.

I would not encourage you to trade in this car on another one, as the dealer will roll your upside down amount (about $1200) into the new loan and you'll be starting out upside down in that one as well.

One last thing...kind of scary. If your car is totalled in an accident (whether or not it's your fault), your insurance will cut a check for the value of the car only. Then your lender will want the rest of their money from you.

Good luck and