Thursday, April 3, 2008

Sister's & My Car Situation

I knew this would happen again, but didn't know when. My family has problems with cars, they buy too expensive of cars, they buy ones that they crash in a matter of months, or they buy ones when they don't even have a driver's license.

I called my sister yesterday since my dad had said she was not doing too well with her new position regarding pay (became a hair stylist at an upscale shop, was an assistant before). When I got her on the phone, she let me know her car was gone. I thought it first was stolen, but she explained that she was negotiating a payment plan since she was behind on the payments, had made a plan and was paying, but they came and took the car anyways. She owes about $8K on the car, it's worth about $3K and was starting to have problems.

I wish there was some magic smart pill I could give my family, but there is not (yet at least). Here's the advice I gave her:

- Buy a beater of a car for $500 (all she has in the bank).
- Save $200/month for 6 months. By that time the beater will be dead.
- Buy a better beater of a car for $1200 (from savings).
- Keep up the $200/month savings for a year, repeat cycle in a year for a $3000 car (from savings and selling the previous car).

I doubt she'll listen, but I tried all I could.

Regarding my beater, it is dead. The brakes are shot and it's not worth pumping more money into this thing. We haven't made a decision yet, but I'm leaning towards us holding off Capital One a bit longer and us buying a $2K car with 75-100K miles on it. For now, I'm driving my wife's car to work and back, while she stays at home.


Jim ~ said...

Advice is what it is and not everyone is going to accept it. I'm not sure if I would want to drive a beater just because it's paid for. I got a 4 year loan on my car that was paid off in less than 2 years. Now it's up to 80k miles from college and work commute, still paid for. I'm a big fan of the 200k miles plan, with regular maintenance and care, it's possible and with no payments.

I know you're trying to get out of debt and avoid going into debt, but the way you're going about doing I just don't follow. Instead of paying off Capital One, sounds like another settlement on the balance, you're going to use the money now to buy a car. It would be one thing if you were current and then used money intended to pay the balance in full for something else. I personally cannot let myself not make a payment to something I owe month after month. How much stuff are you actually current with?

I always put things in perspective though in that food, shelter, utilities, clothing, and transportation are the basic needs. We have to make enough money to at least meet these basic expenses month to month. The money left over after these are met can go towards other things including payments. This doesn't mean have trees removed because you want a garden. If you're not paying a creditor month after month and saving up money, they will take a settlement to get rid of you because you don't pay them. I hate monthly payments but if I were intentionally not making the payment in order to settle the debt, that's an ethical dilemma. Your intentions are good in debt is bad, live on what you earn, don't go into debt, I just don't completely agree with how you go about paying off debt is all.

Dan said...

I some what agree with Jim's comment about the beater but how people chose to pay off debt that they can't handle really has more to do with the situation the person is in. I would think it is better to do settlements then go bankrupt, at least that way more of the debt is being paid back.

As for the car, my dad also bought cars near the end of there life and in the long run it ends up costing you as much in repairs as it would to buy a sub-compact that is a few years old. Not to mention the safety factor driving a car that for the most part are dangerous to have your family in.

With that said through, I am sure the situation that you are getting yourself out of would not allow you the even get a loan to buy a decent vehicle.

How is your gardening venture going? I just started my tomato's, peppers, egg plants & onions. I am going to do some raised beds this year because where I plant is on a slight hill and I am been fighting with erosion for a while.

Hope all is well

Sick of Debt said...

For my sister, she is working a low-paying job, spending cash like it's water on several trips a year (one year she went on 2 cruises and dropped out of college because she couldn't pay for it). She now has 2 repos on her credit, the first one wasn't taken care of either (and she's ignoring it).

We ended up deciding to give her my beater, she has a friend that can do the work needed on it for her. If she knew how to spend less than she makes, I would recommend the route of a few year old sub-compact for her. My general suggestion is not to stay in that bad car, but keep upgrading when she has the money. Any loan she gets now they're going to charge her CC rates for it, causing the vicious cycle of unable to pay and repo.

We have 2 cars now that are valued under $3K each and I have no concerns of them being dangerous and the 1 we've had for a year has had minimal repairs.

Tomorrow morning I'll be posting about settlements and ethics, working on the draft.