canadiandebtgirl

Major Fail: My Car Loan

In Uncategorized on October 20, 2009 at 4:01 pm

One thing I haven’t addressed on this blog, and I think its because I’ve been focused on my credit card debt reduction plan, is my car loan.

Last year, I was just about finished paying off my previous car loan. The car was a 2002 sedan, and in great shape albeit minus a few things that went wrong frequently but nothing major – mostly just squeaks and vibrations. It did however have higher mileage on it since my job involved a lot of driving. On a whim, and really, it was a whim, I decided I wanted a new car.

MAJOR FAIL.

Yes, insert all the reasons why this is so wrong here. And yes, insert the typical reason so many people are in debt here. Ugh. I’m a textbook case. Believe me.

It was my anger of my debt that started my search for a new car. I wanted to sell off the old one and buy an old clunker for cash. But, a shiny new car was just so much more appealing to my shallow, ‘money-doesn’t-matter’ side and since I hadn’t reached the stage where I HATED MY DEBT, it was easy to get convinced. My monthly payments would be the same! My mileage would be better in a newer, more efficient car! This one was more utilitarian because I could fit more in the trunk! … and so on with the excuses.

Now, I would give anything to go back and slap myself. What was I thinking?!?

My new (used) car loan is at an 8.9% interest rate! But I don’t know enough about car loans – can you even re-negotiate the rate? I just took what the dealer gave me (just to add to the MAJOR FAIL). My budget works for the payment, but I know I am overpaying in interest in the long run. It would be pretty sweet to not have that car payment and just be stuffing that cash into a high interest savings account for when my old clunker broke down. No such luck now.

Am I going to trade in the new shiny one? Unlikely. I really like having a reliable car. *sigh* But the question remains… SHOULD I?

Is this something I should think about once I’ve got my credit card debt under control? I just don’t know what to do about it. Sometimes it does keep me up at night.

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  1. I too have a car loan. The interest rate is OK. If I had been smart, the last two years I owned my previous car (it was paid off) I should have been putting that monthly payment in to savings for a down payment on my newer “reliable”. I bought a car that was OK in car payments but had to have some pretty major work done which I had to use a credit card for.

    If I had it to do all over again, I still might take out a loan but I would put a large amount on a car and double or triple the payments and pay that loan off fast!

  2. We’re struggling with paying down some debt too. We buy our vehicles cash though, just because of how much they depreciate, and how easy it is to get underwater on a car loan.

  3. You can definitely renegotiate the rate. When we purchased my new car, the dealer pulled up a “summary” of hubby’s credit report and tried to tell us that he co-signed for somebody and they were constantly late on their payments. That had never happened and we didn’t buy it so we told him to pull up a detailed report. Sure enough, no dings on his credit. Then he tried to offer us somewhere around 7 or 8%. Hubby said that we had already been approved for 5.75% through our bank (a total lie!) and if the dealer could beat that, we’d buy the car that night. The guy was completely shocked and said “Let me see what I can do.” Went and spoke with his manager, came back, and we walked away with 5.5%. And this was 1.5 years before the economy went downhill! So always negotiate!! These guys will do just about anything to sell a car.

  4. If you’ve been on time with your payments for 12 months you can definately negitiate a lower rate. We did that with our car loan on hubby’s car now. It went from 7.2% to 5.5%. I would be surprised if you could refinance with a lower rate. Good Luck!

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