So What Do I Do With This Old Truck Now?
Posted August 26, 2013
WRAL Reader Question
I bought a 2003 Chevy Tahoe from Carmax in Raleigh in October of 2007.
They charged me 18% interest with the finance company called Santander.
My car payment is $468.00. The original price of the car was $16,900. plus $1,500. for an extended warranty (which I never used).
I still owe roughly $14,000. still on this vehicle.
Gas every week costs me approximately $84.00.
My job - 7 years at [ ] is 26 miles away so I have to fill up my car every week for the commute. This is costing me close to half my monthly wages to drive this vehicle.
My credit is not great with approximately $916.00 in medical bills. I am a single parent of two autistic boys and I have no family other than them.
What should I do to get out of this situation that I can not afford. Plus the truck is so old now and has high miles on it. I have paid 56 payments on it so far and still owe $14,000. more.
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Well there is no sense wasting a perfectly good mistake so let's first take what we can from the current situation and use the great benefit received from this costly education.
Extended warranties are a tricky affair. There are some exceptional ones out there but a whole lot of stinkers as well. Buying an extended warranty requires as much focus and awareness as purchasing any expensive financial product. For example, can you terminate the extended warranty early and get a refund? What does the warranty actually cover?
Dealers sell extended warranties because they make money from it. It's a way for them to boost their bottom line.
Just on its face value an extended warranty costs more than the average anticipated repair costs for the vehicle. The company behind the warranty charges more than they project repairs will cost plus the dealer tacks on their commission on top.
If your monthly budget allows you to save money and build an emergency fund for potential car repairs then saving cash to self-insure can often be a smarter financial move.
The car dealer doesn't "charge" you the interest rate. The interest rate you are offered is based on your credit score (risk) and what the dealership might tack on or get a kickback on. You have no way to know if the rate was or is fair or reasonable unless you had shopped elsewhere for a car loan before you went to the dealer. Otherwise people just basically accept whatever the dealership says.
If you belong to a credit union, talking to them first about what interest would be available from them for your credit score is a smart thing to do. You can then take that interest rate you actually qualify for into the dealership and let the dealership beat it. Make them compete against something rather than nothing.
I'm curious, if you bought the vehicle in 2007 and it is now six years later, how long is this financing for? Did you miss payments along the way and that raised your current balance?
Money problems are resolved by increasing income, reducing expenses, or a combination of the both. It is unclear if increasing your income is a possibility. But you could consider looking for a job that is closer, if that's even possible. A second job seems out of the question.
Another way to increase income is to check and see what public benefits you might be eligible for. Visit Benefits.gov to find out. Every dollar in benefits you are eligible for is a dollar more to help your monthly budget.
Just based on an average value for a 2003 Chevy Tahoe it looks like the current value is around $9,000 or a lot less based on options and condition. Regardless you most likely owe more on your Tahoe than it is worth.
There are logical three ways to get out from under the Tahoe.
- You could sell it but you'd have to come up with the difference between the sale price and what you owe on the vehicle to get the title to pass on.
- If your credit score was good, you could consider going to a new car dealership and buying a more cost effective vehicle. When you trade in your Tahoe the dealer will tack on the additional money they will have to pay into your new loan. You'll owe more than the new car is worth but if it's a car you can use for many years and it gets better gas mileage it could work out in the long run.
- You could file bankruptcy, discharge the car loan and medical bills. You'd have to buy a car at one of those buy here-pay here lots and pay a lot for a year while you rebuild your credit but it's an option and might make more sense in the long run. Sometimes a fresh start just makes sense.
According to FuelEconomy.gov it looks like a Toyota Prius C is a good fuel mileage for its cost to look at. Drivers are reporting 47.5 miles a gallon and the price range is in the $20,000 range. A lot would depend on how upside down you are on your current loan and what interest rate you could qualify for but it might be mathematically possible to get you out of your current truck and into a smaller more fuel efficient car, like the Toyota Prius C for less each month than you are paying in your current truck payment and fuel bill.
Let me know what you decide to do.
WRAL Get Out of Debt Guy
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