Financial Guys, need advice on stuff. (car related)
 

Hey folks.

Ok, im gonna tell ya a bit about my situation here that nomally i dont go blabbing about, but i am trying to figure out the best way to handle the car financial situation.

Got the 04 Mustang GT, Auto, Premium, mach1000, allthe bells and whistles.

Im looking to get rid of it and start a 5.0 resto project.

Now, im looking for advice on what would be a better route.

Right now i pay 480/mo +100/mo for insurance. I owe 22,5xx on the car.

I have SEEN 04 mustang GTs with more mileage in colorado sell for 18,000

As some of you know, i have a kid on the way. A resto project sounds like fun to me, plus it doesent require damn near 600/mo in car payments. If i drop my car and grab a used 5.0 in good shape for 4k, ill be saving 400-450 a month. then here and there when i get extra cash i could work on the car.

I have 2 options i see at this point.

A) Origional Plan. Ive been aiming to up my payments to 1k a month. Im paying probably 100 a month in principle (i refi'ed recently, damn im stupid sometimes) and about 380 a month into INTEREST. (interest up front)
So, Paying 1k a month, that means im putting in about what, 620 a month in principle. Thats all. I need to pay off about 4,500 on the loan before i can offload her without taking a hit in the wallet (any more than i already have)
This will take me about 7 MONTHS before i have enough of it paid off to sell. Also, being a homeowner i get a bitchin tax return, probably around 3k again this year i could dump into it. But i have a couple other debts i wanna get settled before the baby comes. I want finances freed up for the kid. Kid > Mustang. But i might be able to have both.

B) Option 2. I have a home equity line of credit. I can take out the 4.5k, pay off the overhead. Then i can sell the mustang. Once the stang is gone i save 100 a month in insurance, plus the 480 car payment. Compount that with the 500 extra a month i was gonna dump on it, i got 1,100 per month i can use to pay off that loan. Which is a little over 4 months.

So, i could have the car sold, pay off the debt in 3 months under plan A. Savinging me quite a bit of money....
In that 3 months, i could probably save up 2.5k and get a Mustang 5.0 with roughly 1,500-2000 on loan, and have payments around 100-150 tops, and by this time next year i wont have ANY car payments.



So, you slick and savvy guys with finances....

What do you think of this situation? any pro's/cons you can think of?

hell, basically i will be avoiding paying about 2,500 in interest, which is what i would pay if i continued to pay the car on the CAR loan rather than if i put it on the 2nd mortgage.

advice? input?

OH YEAH.... DONT BUY A NEW CAR>.... EVER... PERIOD... waste of money.

go for it!

i always tell my parents and freinds to wait and get a car used. Because you can A get a hell of a better deal on them and B you can see what problems the car has had and if its a lemon or not.

both of my vehicals i have owned so far we got used when they were either 2 or 3 years old and saved boat loads of cash.

I didn't read through everything, But seeing as you are deff trying to save up a lot of money before the kid comes, by best advice would be to consolidate all your debts so you dont have as much interest also. Dont get a second mortgage either, just consolidate it all into one. Your car, credit card debts, everything. I know for sure you can save anywhere from $500-$1000 a month. and a lot more if you add it up into the year. Buying a 5.0 stang wont do anytihng, since you have a kid on the way and once the kid comes your not going to have time for it. Id keep your stang as it is a reliable car. Like i said, refinance get something like a 5/35. (5 years interest only, and the other 35 a fixed rate mortgage with all your debts consolidated). This gives you 5 years to rack up a lot of cash, you get to keep your car payed off, and you have a nice long time to pay for it. Getting equity cash/credit lines/ 2nd mortgage is stupid. Just another way to push around loans.

like i said, keep your stang now, just refinance again and consolidate everything.

What are your other car situations? Is the Mustang an "extra" car? If it is not, a 5.0 project car might be a bad idea anyway. Also, if you have other cars, what are they and how are you set on those vehicles?

Your situation is a common one. We can dwell all we want on the fact that hindsight is 20/20, but fact is, you can't change the past. Also, two bad decisions don't make a right. If you sell the car....you LOOSE lots of money. If you keep the car, you still loose money, but not as fast (depreciation).

Selling the car now will cost you about $5000 large. At your current payment rate it would take you about 10 months to make that up. Acellerating your payments just so you can be at breakeven will just make you feel better. Either way, you are out $5,000.

However, sometimes you have to spend money to make money right? So, if you are trying to improve your cashflow, your only options are to sell the car, or to consolidate. In the longrun, consolidating will cost you more money and may even put in a more upside down position then you are now, unless you can improve your "cost of money" or interest rate.

So, with all that, here is my suggestion:

1 - Use your house to pay-off the car. The interest rate on the equity loan is most likely lower then the the car loan.

2 - The interest you pay on the car will then be tax deductible.

3 - This will have an immediate affect of improving your cash flow probably by $300 - $400 per month. Many home equity loans only require you to make interest payments.

4 - Put the car up for sale. The home equity loan will give you the power to be patient because the loan will not kill you. Being patient will do two things. First, you will get the best possible price for your car. Second, you will get the best possible price for the 5.0 you want. Remember the $5,000? I bet this gap will narrow to more like $3,000 by not jumping into something. This is like having your own money laundry.

This will help maximize your cashflow and reduce your debt. If you wish, you can payoff the equity loan faster....that's fine, but you don't have to. Do it now, you you can maximize your deductions for 2006.

Another thing to consider is the your total monthly auto debt payments. Every financial consultant that I have ever spoke to always recomends that your TOTAL car payments plus insurance should not exceed 15% of your gross income. I bet there are 10 guys on this site who can claim that. Most people spend way more then that, but that is the rule for sound financial mgt.

I just did the math on my own, personal situation and I am at 4.6% and that includes insurance on three cars, so I put my money where my mouth is - LOL

I can certainly empathize with your plight. My wife and I had a down payment on a brand-new BMW Z-3 back when they were cool (1997) then got pregnant and cancelled the order. I got spooked, but in reality, we could have probably gotten the car.

Kids change everything and whent he little sucker arrives, you may even care less about Mustangs.

like waterDR said above, if your stang is the only reliable transportation you have dont get rid of it. also, if your girlfeind has a car dont rely on her's. Think about it like this, her car is good, you get the 5.0 and starts 3/4 the time and runs rough in cold weather. you have to take the kid to the doctors and shes at work and your car wont start.....what do you do?, how many times will you allow that to happen? plus how much time will you really have to wrench on a project car with a baby. diapers, feeding, work, your time will be filled. you'll have weekends, but your girl isnt going to allow you to work on your car every weekend, I know that one from experience. take a step back and look at the whole picture, your dont want to put yourself in a situation that can really hurt you down the road.

i deff wouldn't rely on that 1980 Honda civic thats about to blow up on you, I would just keep the stang man and pay it off with your mortgage. and dont say the whole your getting that 5.0 stang and fixing it up. A) your not going to have time for it. B) it will be sitting in your garage for ever. C) its going to take more then $500 a month in parts to get it as fast as your stang now

Fixing up a car is expensive and time consuming. Depending on whats more important to you will dictate what you can do. I dont think you want to be wrenching away while you miss out on your kids firsts. When your kid gets to a certain age where he or she can watch and help that is the time to tackle a project to bond with them further.

I have spent alot of money by having someone do my motor but its nothing compared to listening to my 16 month old daughter say her first group of words which was "Oh my God" it just came out of nowhere and my inlaws and wife where all there, you just cant buy this back. I can always make money but I can never go back 2 days and experience that.

Priorities are in order God,Family,Work,Mustang. If you want to cut you car bill in half just sell your stang and start looking for someone that has had work done to it since he will not recomp his $$ back but youll end up saving plus not having to do it yourself but you have to be realistic or youll end up spending alot. If its a 5.0 I would go with a 94-95 since comfort will be an issue with your family plus they can be had real cheap. Fox bodies have crappy ride and rust plus interior all bad.

you still owe that much?? how much did u buy the car for?

Thanks for the advice, i think this wuill be the best route.

Thanks on reminding me that it is tax decutable, i forgot about that with the 2nd morgage.

I have an 84 civic that is my daily beater, she always starts the first time. Regardless to what SPin says, she is nowhere near blowing up on me. After replacing the clutch and the clutch cable she is running strong as ever, but right now she is out of commission while i wait for a new intermediate exhaust pipe cause the last one was so rusted. Should be her in a week or so. Other than that, she runs great. only 106k miles on her, i can pull out another 100k easily.

The mustang 5.0 i would try to just pay in cash. That would mean between her and i we would have 3 vehicles and 0 payments.

The girl has a car well.. not exactly i guess, its a Kia.......but it gets her where she wants occasionally. So having the 5.0 will also be good cause if her car craps out she can drive the honda and me in the 5.0 untill she gets the Kia fixed.

LOL... yeah, i know the mustang will fall 2nd priority to the kids, however, somedays i will want a couple hours to myself wrenching away. LOL...

I figure fixing up a 5.0 would be a hellofalot cheaper than contonuing my payments. Plus i can take as long as i need to. no rush.

oh crap man, she was what, 28,900 when i bought her newi think?

there was a big discount of 4-5k cause they were moving em out for the 05's, however i carried about 4k on my loan over.

The first couple years on a car loan yer paying mostly interest. They figure out how much it is, the length of term, and the interest rate.

Example:
So if car is 20k, and you have a 10% APR,
year 1 is 20k
year 2 it is 22k,
year 3 = 24.2k,
year 4 = 26.62k,
year 5 = 29,2k or something like that.

So the total loan is 29k. They want that 9k interest first. so out of say a 500 car payment, for the first year only 100 a month goes to the Principle. So after the first year, the you still owe 18.8k
Next year you pay 200 a month into principle, onle 300 into interest.
next year less interest, more principle.

So buying a new vehical, the depreciation is immediate, plus you are paying all the interest up front, so your really dont start hacking away at the loan much untill years 4 and 5.

that is why it is so hard to get out from being upside down on a new car.

damn thats like sticker price around here for premium gt

04 premiums went from 23-29k, depending on the packages.

Mine has the 40th anniversary package, its auto, mach 1000, premium, all tyhe bells and whistles. Only way it could have been more expencive is if it was a Vert.

Dont forget, there are Dealer fees, handling fees, taxes, surcharges, etc, etc usually rack up to be a couple grand.

I checked out yahoo autos and craigslist in this area. 04 GT coupes, no mods, higher miles are going right around 18k...