Personally, unless that 20 year old car was in pristine condition, I’d stick with the Element. Most modern cars are done at 20 years old. You will have trouble finding parts, things will be wearing out and need replacement. You may be lucky and have no big repairs, but if you do and you can’t get parts for a couple weeks where will that leave you? Can you get by without any car for that long? This thing probably has a carburetor. I recommend you stay away from any car with a carb. You may be mechanically handy, but carbs will break your heart and spirit if you aren’t familiar with working on them. Electronic fuel injection almost always starts, even when it’s out of whack, it starts and will get you to the mechanic.
If you must sell off the Element, then I’d say look for a 10 year old domestic station wagon or even just a big old Crown Vic or something like that. Any older relatives who might give you a deal on such a car? Ask around, you might be surprised.
I think the best decision you can make financially will probably to keep what you have. 7.75% is a decent interest rate and you probably only have one or two years of payments left before the Element is paid off. Trading in any 2003 vehicle for a 1988 vehicle is crazy. Don’t do it. Just keep what you have. Any trade-in senario will probably not be cost-effective.
Any financial analyst will tell you that if you are considering trading in a vehicle for a more fuel efficient vehicle, the premium you pay for the new vehicle will be more than the fuel savings. Talk to a certified financial planner if you need financial help. It will cost you money, but the CFP will save you more than he or she costs.
Don’t feel guilty about the trips. You might have unutilized cargo space, but the Element is a relatively small lightweight vehicle that gets pretty good mileage. The Element is also a certified low-emissions vehicle. It really doesn’t pollute that much.
Thanks for your comments, Jeremy. Does your opinion change when I tell you that I’ve only been paying the interest, and not any of the principal, of the $17,900 Element? Also, the low-emissions info does assuage my guilt a bit.
It really sounds like you need to dump this thing for something a lot cheaper (maybe a decent $3-4000 car would work for you?). I would not listen to any financial advisor who thinks that it is ever OK to borrow money to buy a car, especially one that you clearly cannot afford. Just get out of this thing as fast as you can and buy something you can pay cash for, even if it is a POS, then never do this again. You can save the planet after you can afford to meet your basic transportation needs.
That only strengthens my belief that you should keep this car. If you sell it, you won’t get as much as you owe, so you will still be making payments on a car that you don’t have any more. That isn’t going to solve your problem. Like I said, get some help from a certified financial planner. Would it be worth it to spend $100 to save thousands of dollars over the next few years and get on the right track?
If you can live without any car, selling this car might allow you to pay down your debt and you will see some light at the end of the tunnel. If you need a reliable car to get to work, however, selling this car will only compound your problem. Trading in reliable transportation for something that is more likely to break down and keep you from getting to work isn’t going to help you solve your financial problems. Look elsewhere for a solution.
I recommend you go to www.cfp.net and click on “search for a certified financial planner professional” on the left side of the page.
Some people don’t believe in credit, but I believe that used responsibly, credit can be a useful tool. Paying cash is a good idea if you have cash or you can manage your cashflow in a way that allows you to save in advance, but for some people in some situations it isn’t realistic. This person is in a situation that requires counseling from a specialist in finance, not a specialist in cars.
The irony of professional financial planning is that those who need it most are the least likely to use it. This is because of sticker shock. However, I can tell you that spending $100 to consult with a certified financial planner has saved me thousands of dollars and has enabled me to go from being in debt to having a safety net in savings. As I look back, I realize that not spending that $100 would have cost me immensely.
I the OP buys herself a “$3-4000 car” she will have to take out another loan and will still have to pay down this car loan at the same time. Do you think she can take that kind of hit to her monthly cashflow if she is only paying interest on her current car loan? No. She will now have two loans, one at 7.75% and a new one for a used car at a higher interest rate (probably at least 12%). She will have compounded her problem with no end in sight.
I did some more research and have discovered some new information:
*The bank that loaned you the money for the Element probably won’t let you sell it. You don’t have the title yet.
*If the bank will let you trade in the Element, you might be able use the equity to pay down a portion of the loan and buy the replacement car, leaving you will less debt. However, you will now have an older less reliable car.
I still don’t recommend that you sell the Element, even if the bank will let you. In terms of monthly cashflow, you will be in the same relative position with the loan payment and the car you have won’t be of the same quality and reliability.
You missed that part where she said she bought it with a credit line loan. Usually, those types of loans are based on real estate equity or some other collateral. The bank may not be holding the title. But, I agree that selling it may not be wise. Without more details of her personal finances than I would feel comfortable asking, we really can’t say much more. The advice to seek out a financial planner may be a good idea.
BOTH of Ranck posts gave you the best advise. Stay away from old Hondas…Under the hood, they are mechanical nightmares.
The ONLY thing that matters is COST PER MILE. A Crown Vic or, even better, a Buick Estate Wagon, can be had cheap, many on the market are low-mileage geezer mobiles, maintained, garage kept, no rust. Don’t worry about fuel costs, that is the SMALLEST expense of owning a vehicle. A Vic by the way will deliver 18/26. The Big Buick a little less…
It sounds like you are WAY upside down on your Element and you better deal with THAT before the Repo Man gets it…
Thanks, Craig. It would be great to find a decent, cheapo car that I can pay cash, and that has some life left in it, and upgrade when I have the money…someday…
Thanks for your comments, Jeremy. Unfortunately, I cannot live without a car right now. I’ve looked into that option, and it is just not realistic. I’m thinking of going to DA, Debtor’s Anonymous, because they will give feedback about this situation.
I agree that cost per mile is the critical number. However, if you make the mistake of borrowing money to buy a car, you need to include the cost of the loan in that number as well. If it was me, I would just scrape up whatever cash was needed to get out of this loan and buy a beater for cash (an old domestic is as good as anything, but just buy the best thing you can afford). Start saving for something a little better and upgrade (for cash) when you can afford to. The advantage of older cars is that they do not depreciate very quickly, so you can usually get your money back out of an old car by reselling it. Eventually you will actually own something nice, instead of driving around in the bank’s car.
The lesson is; never, ever borrow money to buy something that is going to depreciate (especially vehicles). Only borrow money (if you must) to buy appreciating assets (real estate, a business, etc.).
Yes, I bought the car with a credit line loan. I hold the title. To give you some more information on the general state of my finances: tough situation. Was left a lot of debt from someone and incurred some all on my own. Will be inheriting some real estate in the next couple of years, and with the sale of said real estate, I will be able to pay off the entire credit line loan, including the Element, if I still have it. That was the plan all along, but an unexpected kink threw itself at me, and now I’m struggling to pay general living expenses. Until I can sell the property, I am in this very difficult financial place. So, perhaps this info sheds light on new opinions? Thanks in advance.
I know I will definitely not use loan $ to buy a car from now on! The Crown Vic or Buick Wagon both have less vertical space than the Honda Civic Wagons or Toyota Wagons, and I need as much vertical space as I can get. They are also usually longer than the Japanese cars, and since I live in the city, and park on the street, maneuverability and parking length is crucial. But I don’t want or need something as big as a van. Honda Civic Wagons get something like 29/35, significantly better than a Vic’s 18/26. Perhaps there is something in-between the Honda and the Vic, in age, size, useable space, and fuel economy? Thanks Craig and Ranck.
I think the bottom line is that you have to decide if you can stick it out with loan payments until you have some cash, or if you want to sell the car for whatever you can get and still have the remainder of the debt. At least you are not upside-down on a car loan so you can sell without having to come up with the difference in cash. One option is to sell the car, pay off the majority of the credit line and buy the cheapest reliable car you can find. Personally, I sleep a lot better without debt.
If you sell the Element, and I say if because it is not clear to me that you should, what you replace it with must be cheap to purchase. The difference in fuel mileage is going to be small compared to the price of the car. The price of a car that gets good fuel mileage and has the room you want is going to far outweigh the extra fuel costs of a bigger car. Honestly, it sounds like you have pretty much the perfect car. It has the capacity and gets pretty decent fuel mileage and is really a very clean car environmentally. I understand things are tight right now, but if you can ride it out you will probably be better off in the long run.
The principal of the loan is on a Line of Credit, so I can sell it if I want to, I just wouldn’t be paying back the full amount I took out, which, technically, is OK, but not desirable.