Should we take the money??

[FlyerInHi]

How about selling the cars and buying used?
Or buy used cars and letting the bank repossess the new cars..
Default on credit card debt.

In this way, they can easily get rid of car and credit card payments and bank the money.

Credit will go the dumps but that would be a blessing because they can’t borrow anymore. In 7 years, they will be financially healthier and can rebuild credit.

Hey, it’s just a calculated business decision. Businesses and even countries default all the time.

[Coronita]

[quote=outtamojo]Are they still offering those 0% 18 month balance transfer
credit cards? When we had a revolving debt/car loan we rolled everything over into 2 or 3 of those and paid things off without paying any interest at all – just be sure to roll it over to another 0% card or pay it off 2 months or so before introductory period is over.[/quote]

——–NO NO NO NO NO NO NO NO NO NO————-

These balance transfer offers only work for
1) People who have demonstrated they can exercise financial restraint

and

2) People who can pay attention to details and make payments on time every single time.

With all due respect to the OP (which given his new info he revealed…and kudos for him to offering data about it, since as someone has already mentioned he’s/she’s already more than 1/2 way to solving his problem by acknoledging their could be one), if I were the financial planner for this couple, I would say until he/she can prove otherwise, let’s error on the side of doing the least complicated thing possible, because that’s just one more thing this couple would need to juggle on top of whatever else stress he is already juggling. Two jobs, 3 kids (one with special needs) and 3 dogs. That’s a LOT of distractions.

No 0% balance transfer option,no jiggle credit card games (which someone at works does to pay his kid’s college tuition_, no other game some of you more seasoned people who can beat the credit card company at their own game can manage to do. You are probably 10% of the population that can win at this game, the remaining 90% of the population will lose and pay a pretty big price for trying to play. If that’s not how the 0% transfer offers work, credit card companies wouldn’t play this game to lose money. So the last thing this person needs is an overly complicated strategy.

The first thing I would do is eliminate this $5000 credit card debt. The easiest thing I would do first is go through ones entire house and put everything you don’t need on ebay/craiglist/garage sale for sale. I’d say the average person has more than 50%+ of useless crap bought at some point just sitting their at home doing nothing.

My crap is probably closer to 60%-70%. That garage sale nets $1000, use that $1000 and make that $5000 to $4000 outstanding balance.

BTW, while your realizing earning that $1000 take a hell of a lot of work to be forking it over to a credit card company, you might as well get a nice par of shears and cut up your credit card, or at least stick them in a nice bottle of water and freeze it in the fridge. So you can’t use it…For a long long time. Or at least if you want to use it, you’re going to have to wait for it to thaw from that really big block of ice, giving you plenty of time to think whether you really need to make a purchase. Pay with your debit card or pay cash. Don’t have money to pay, too damn bad…You ain’t buying it.

Take every bill off of autopay off of your credit card.. Speaking of which. If you have landline phone and a cell phone, now would be a time to cut either or out of your budget…Your cellphone is a $150/month expense that most likely you can live without. Or get a prepaid one just in case for emergencies. Got cable TV? Goodbye for now. Most of the 200+channels on directtv you don’t watch anyway. There’s only so many episodes of storage wars, or duck dynasty, or hardcore pawn you can possibly watch or other quality programming. Cut the tv out, go outside and to the park and spend time with the family. It’s probably better entertainment anyway.

That $150-200/month, you stick into your nice retirement account. Like starting next month… Get your cable and/or cell phone back after you’re done with your minivan lease payment.

[Coronita]

I hate the auto industry. They no longer sell cars. Now they sell payments. It’s such a shitty thing to do.

I have no idea what do to with the upside down prius. Again, I wouldn’t sacrifice the house over it, since worst comes to worst the bank repo’s the car, and it becomes a ding on the credit.

I hope the OP has gap insurance. Because if someone hits his car and totals it, even if it’s the other person’s fault, insurance often will only pay up to the bluebook value, leaving you the owner on the hook for whatever difference.

Seems like the prius is unfortuantely going to be around for some time. The minivan however is on a 4 year lease, so eventually that will end. That’s good so car payments probably will be halved in a few years. Next car can be a nice preowned one that is inexpensive.

[an]

[quote=lpjohnso][quote=AN]Something tells me that if they only qualify for a 10% car loan, they probably won’t be able to do a 0% balance transfer app-o-rama.[/quote]
This could be very true. However, our credit is better now than it was a couple of years ago.[/quote]If your credit is better now, you should try and refi the car. Not sure how much you owe on it vs how much it’s worth. But if you’re not upside down, you can refi to much lower rate or you can get a HELOC to pay the difference. That way, you won’t be touching your original home loan.

[matt]

I am blessed. I have paid off a 1M plus house in La Costa and so far accumulated over 1M in savings. I am 38. However it wasn’t until last year that we bought my wife (3 kids and a dog) a used 2009 Odyssey. Before that she was driving a used 2004 corolla which we ended up giving to a friend in need. I drive a 2002 acura rsx with over 200K on it(yes my work colleagues tease me about the rice rocket). I dream of owning a Prius one day!

I’m sharing because these are choices we made to progress towards our goals. I’m sorry but when I learned about the new/newer cars the whole picture changed and I went from sympathising to not. The best advice I could give you is live more frugally and your car’s are the most obvious unnecessary expense.

[joec]

[quote=lpjohnso][quote=all]Selling a house in order to keep buying new car every 2-4 years does not sound like a great idea.

You might not like spdrun’s model of driving 20+ year old cars, but is 2013 Prius really that much better than 2007 Corolla? And the lease on Odyssey is close to what monthly payment would be if you just bought new.[/quote]
I’m totally down for the 2007 Corolla.[/quote]

Is the wife ok with the 2007 Corolla? In my shoes, I know my wife likes newer/nicer cars than me now so it’s a hard sell for women to drive old cars (safety).

I do the balance transfer thing unfortunately…I do get some 2% fee ones so since we run a business and charge a lot, have lots of cards and very high limits. That makes it easier to avoid messing up. I think if you also miss a payment, all your cards can get jacked up to a very high APR so you need to have high attention to detail to not mess up.

I assume you aren’t contributing to a 401k? If you had a large balance, you can also do a loan which is a decent option IMO. Pay self interest, fast access to money, can withdraw a lot, doesn’t show up on any credit report…

You lose that saving for the future thing, but hey, if you’re paying 20%, I think you need to close that card out ASAP.

I think your 2 cars are definitely screwing you up. Our soon to be paid off car is lower in payment and we’ll own it soon. Course, we put a lot down initially so it never was underwater…

With all the data, I think it’s safe to say you shouldn’t refi/cash out as there are too many things to spend on.

[svelte]

Given the new information, it’s pretty clear the questionable decision was not the house purchase. That was solid. The questionable decisions were the cars, as you’re aware.

I have to admit when you bought the house and immediately remodeled it, I became a little concerned. It wasn’t just a simple remodel as I recall but a pretty high end remodel. That gave me pause.

In the four years since purchase, you’ve spend a good chunk on a remodel and purchased at least two new cars.

Now is a good time to pause and evaluate.

You now have three kids – it is time to focus on them. No more trips to Vegas. No more new cars. Nothing but protecting that nest and paying down your debt.

Kids don’t care if you car is 1 year old or 10 years old – they really don’t. Give them a loving stable home and a few toys now and then and they are happy.

I’ll tell you a story about when we bought a new house when my son was 10. I was concerned about whether we could afford it, but I knew it was a wise thing to purchase from a financial standpoint (that turned out to be correct).

My son and I were driving somewhere in my truck when we opened escrow and since I’m a worrier, I let him in on the big decision we were making. I asked him if it was OK with him if we bought the house and couldn’t afford to go to Disneyland or do other fun things for a few years. He fell silent. He thought for a minute. He asked if he would still get toys at Christmas. I promised him like I’ve never promised that his Christmases would not change. He said then buy the house.

Kids are pretty simple. My son’s big thing was getting great gifts at Christmas. That is all he really wanted. I’m sure your kids have a similar one or two things that are a priority to them.

Just make sure you keep that nice, stable house you have and focus on the one or two things your kids want each year and see them through to adulthood.

I can guarantee (almost) that if you sit down and tell them the situation – that you’re going to have to cut back on spending – and ask them what is important to keep in their life as you cut back, none of those kids will say a new minivan.

I’ve often said the best things in life are free. And we are lucky. We have the beach right here. There are many, many fine parks in San Marcos – even a lake right there in Discovery Hills. Or take them to Jack’s Pond. Year passes to the zoo are dirt cheap. And there is always camping.

I know you’ll be giving up all the fun things adults do (well, the ones that cost anyway 🙂 ) but that’s what my wife and I did for over a decade. No nights out, no drinking, no social life. Just raising kids. That’s it. Our kids thought we were outcasts since we had no friends.

But once they turn 16, they really don’t want to hang out with mom and dad anyway. Then your social life will return…you’ll find new hobbies…Vegas will once again call your name. And life will take you to the next adventure beyond parenthood. Our circle of friends is now larger than our kid’s. 🙂

All things in moderation and at the right time.

Sorry to be so preachy, I’m normally not like that. But I get the sense you’re at a crossroads and if you make the right choices you’ll have set yourself up for a very bright future.

(ps – I think you should stay pat on the cars for 3 years. You should have the Prius almost paid off by then. The lease on the Honda will be up. Then you can buy a real nice used car for $8-9K with 100K miles and have two reliable cars on your hands…that should get you through another 5 years or more…I have a friend with over 250K on his Prius and it’s still going. Worried about going on long trips with a 100K+ mile car? Rent a car for the trip! That’s what we did – worked out fine and a helluva lot cheaper than a car payment all year.)

[Anonymous]

How can someone be $11K underwater on a car?

Take the car to Chula Vista and conspicuously leave the keys on the roof. Go have lunch somewhere and be sure you have transportation back home.

That will improve your balance sheet by $11K.

And you don’t need to travel anywhere. You live in San Diego. People come here for vacation.

[spdrun]

Why worry about road trips in a 100k mile car? Most post-2000 cars will last for 200k if well maintained, if not longer.

Nothing wrong with travel if approached intelligently. Rent out the house on AirBnB, Craigslist, or to a friend through your network for a month, travel light, like college student backpackers. Or take a camping trip and rough it for a weekend.

Travel is part of education, not something to be avoided.

[svelte]

I think at least one trip a year is for mental health.

I can see things so much more clearly if I’m over a hundred miles away from my normal daily routine – it’s almost like I’m outside looking in. I return to my routine with more enthusiasm, a clearer vision for where I’m going, and appreciation for just how good I have things.

It can be a trip to relative’s houses (couch surfing is cheap 🙂 ) as long as it is at least 100 miles – and several hundred miles is better – from home.

[svelte]

[quote=harvey]How can someone be $11K underwater on a car?

Take the car to Chula Vista and conspicuously leave the keys on the roof. Go have lunch somewhere and be sure you have transportation back home.

That will improve your balance sheet by $11K.
[/quote]

? Unless they bought gap insurance (and even that expires after a brief period) they would be out the difference between the car’s value and what they owe.

ie, they would still be on the hook to the bank for $11K and yet have nothing to drive.

[FlyerInHi]

[quote=spdrun]Why worry about road trips in a 100k mile car? Most post-2000 cars will last for 200k if well maintained, if not longer.

Nothing wrong with travel if approached intelligently. Rent out the house on AirBnB, Craigslist, or to a friend through your network for a month, travel light, like college student backpackers. Or take a camping trip and rough it for a weekend.

Travel is part of education, not something to be avoided.[/quote]

I love your outlook on life… and the old cars.

But you’re really swimming against the tide. People want all the trappings of middle-class prosperity. That’s what gives them psychological comfort.

[svelte]

[quote=FlyerInHi]
But you’re really swimming against the tide. People want all the trappings of middle-class prosperity. That’s what gives them psychological comfort.[/quote]

I see you’re not a parent.

The last thing a parent wants is to have their car disabled on the side of a freeway with 18 wheelers whizzing by inches from the center of their universe, the one thing they will protect at all costs.

There is no denying that an older car is more apt to break down…that’s what drives the decision, not the trappings of middle-class prosperity.

[Anonymous]

[quote=svelte]ie, they would still be on the hook to the bank for $11K and yet have nothing to drive.[/quote]

And if they don’t pay it … ?

[Coronita]

[quote=harvey][quote=svelte]ie, they would still be on the hook to the bank for $11K and yet have nothing to drive.[/quote]

And if they don’t pay it … ?[/quote]

And as I stated earlier, exactly why you wouldn’t want to use your heloc to pay off other debt. You can survive having one car repo’ed if it really comes to that. Why throw good equity from your good home purchase on a bad debt?

I always said, pay yourself first, then your creditors.

Anyway, I think for the benefit of the OP, we really should put our heads together and give the OP constructive ideas on how to get out of this situation.

[Author]

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