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Tuesday, June 06, 2006

Email to Dave Ramsey

I emailed Dave Ramsey tonight. No idea if the email will make it on the air tomorrow, but here is what I said.

In January, I bought a car, replacing my $400/month mortgage payment with a $325/mth car payment. The car a 2004 Malibu with 25,000 miles (now 27,000) is the nicest thing that I have ever owned. Since January I realize I should sell this, even though it is the nicest thing I own. (I became an FPU member last month). Problem is Kansas no longer sends the title w/ lein to the owner. They instead have the lender (in my case a lender in some Tennessee). How do I sell my car in this case? Selling this $15,000 car will pay off most of my $19,000 debt. Though I will need to find another cheaper car. Doing this also would pay my debt off by the end of the year.

As I say on my personal finance blog, http://www.debtfree4ever.net, I currently only have a little over $100 in my emergency savings. I only make $19-20 k/year (not counting an additional income). My utilities, end up being 32% of my income. I believe, if I really push it, I could, if I kept my car, pay extra payments to the car people, I could pay it off in 24 months instead of 72 months. Looking to get your advice on this specific situation. I will be listening tonight (Wed) after my FPU class, which gets out at 8:30 PM CT.

What do you the readers think?
Posted by Kevin Surbaugh at 6/06/2006 11:39:00 PM
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6 comments:

  1. I'm sorry, but I think Dave will tell you to dump the car. I don't understand how you are upside down on a car bought used five months ago. I'm afraid it was too much car for your income. Also, I don't think paying it off in 24 months is realistic. If you make 20k, and your utilities are 32% of that, you are spending ~$6400/yr. To pay off the car in two years, you basically have to pay $10k/year. Then you have to eat, actually drive the car, thus put in gas, change oil once in a while, etc.

    As Dave would say, I want you to own nice things, I just don't want you to be a slave to the bank.
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  2. LAmoney -
    I think you missed something, my main question was asking how to sell it in the situation posed. I then went on to explain that I had an additional $300/mth income from another source that I could use to pay the car down in 2 years rather then 6 after I use that other source to establish my emergency fund.
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  3. You're going to pay interest on your car, and the auto loan note says how much over its lifetime. You're absolutely right that paying it off in 2 years rather than 6 would cause you to pay *less* interest. But how much would you end up paying? More than $15,000, I can tell you that. And that's the real cost of your car.

    I drive a 1983 Honda Accord that someone just gave to me cuz it wasn't worth more than $500. It's a champ! Mostly I ride a coaster scooter and take the bus. I've saved $17,250 (rather proud of myself). If I want a shiny car, I'll pay cash. And for once the real cost will be settled on the day I buy it, not over the lifetime of some loan.

    (Alternatively, you could finance $15,000 at 0% and your accelerated payments would go a lot further. Crazy talk, I know.)
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  4. I'm not sure of the logistics of selling a car on which you are upside down. I would call the lender and ask them.

    Did he respond to your email on the air?
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  5. lamoneyguy -

    Doesn't sound like. The show isn't live here, being that its on 7-10. So after I got out of my FPU class all I heard was the last hour and a half and from his comments all 3 hours he addressed business people or what he called "EntreLeadership."
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  6. Anonymous -
    you are correct...however consider the loan itself is not $15,000 anymore as I have paid on it...part of that $15,000 is the credit life that the Auto Insurance gets away with requiring you to buy from them (no other loan can require you to buy it from them). If I got $15,000 today, it would be paid off entirly....as the interest would stop. If I am able to pay it off in 2 years rather then 6, I would save lots of $$$ in interest. Of course the wisist thing, and what I really don't want to do, is sell the car now and pay off the loan. How I do that since, Kansas no longer sends the title to the holder, rather to the lein holder. In my case the lien holder is in another state.
    ReplyDelete

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