HisHersMoney

It’s official, one of our cars is now paid off! We had a balance of around $4300 left on the loan which we just paid off when Her received her year end bonus. It felt so good to call up the bank and tell them to just deduct the remaining loan amount from the checking account and then to able to log back in online and see the loan simply gone from account listing!

We have an extended warranty on the vehicle which covers it bumper to bumper for the next 27 months so we plan on keeping it for at least that long!

What are we doing with the $455 a month that used to be used to pay the loan? It’s going in savings. We set up a sub account at ING called our New Car Fund. Hopefully by the time we need a new car we can either pay cash or at least put a nice down payment on it to minimize the loan.

Unfortunately we still owe about $35k on our other car loan so that one won’t be paid off for while, but we knew that when we bought the car last fall!

In my previous post I wrote about our new car and the associated ridiculously large loan associated with it. We financed $37k, none of which was any negative equity. We traded in His’ car which had the most miles out of our current cars and was also starting to need some work. While He was sad to see his car go He understood the rationale and our trade in value was a wash for what was owed on the car.

We did a 4 year loan on the new car. Why a 4 year rather than a 3 year of 5 year? My rationale is as follows: When purchasing a new car most people take a 5 year loan on it. Well, since the car is already about a year old that leaves 4 years on what would have been the original loan. I think that you shouldn’t exceed the original standard 5 year loan period and if the car is older than 5 years then you should pay cash for it or be doing an extremely short loan.

By keeping within that 5 year financing period the goal is to make sure the car is at least worth what you owe on it. Of course if you by a car brand new you’re immediately up side down on it which is why we look for a car that’s about 1 year old.

Our other car is a 2004 model and was originally purchased in March of 2004 for around $30k by it’s previous owner. I purchased it in Sept of 2005 for $18k. I originally did a 3.5 year loan on the car which I actually refinanced with my credit union when they were offering some great interest rates. They were only allowing even year terms with the offer so it changed the length of my loan but I’m happy to report that the car will actually be paid off in 3 years, 3 months!

The originally warranty expired in March of 2008 and we actually did buy an extended warranty. We shopped around and ended up going with an extension of the bumper to bumper coverage from the manufacturer which they offered with 10 months of interest free financing (I think we had to pay a $25 fee or something for the financing). Our payments were $140 for 10 months and the car is now covered for another 3 years with more than enough miles included.

We plan on keeping this car until at least the extended warranty is up if not until it dies!

As we prepare to close out 2008 and begin 2009 it’s time to look at what we’ve accomplished this year and our goals for next year. Back in March when we started this blog Hers had just over $19,700 in debt. Of which, $11,186 was student loan debt. I’m happy to report that all of Hers student loan debt has been erased!

How did we do it? We had two months of free rent as part of our move-in deal at our apartment which we took in Sept and Oct which freed up a big chunk of money. We also put every spare dollar towards it every month and when I received my yearly bonus in Oct I took 100% of it and paid the balance off. I can’t even begin to tell you how great it felt!

Our car debt was $8,528. We just made our regular payments of towards this debt and we currently owe about $4,400. I should be receiving another bonus in Dec and plan on paying this debt off completely. When trying to figure out where to apply my bonus funds we looked at all of our balances and all of our monthly payments and decided that completely eliminating the car debt on that car would have the biggest impact on our monthly cash flow.

So, you would think I would be able to claim debt freedom on the Hers side of things. Not so fast. There was a rather large purchase made shortly after we got married in August. You see, we bought this convertible BMW. The one we purchased is about a year old and originally costs about $55k and we paid around $43k for it. While still a substantially huge amount of money at least some one else ate the first $12k of depreciation. We did a four year loan for $37k and paid the rest cash. The payment is absolutely ridiculous (around $900 a month) but I absolutely love it.

So while many things have been paid off, we go into 2009 with a car loan of just over $35k.

Wow, I can’t believe I think that $3.78 for a gallon of gas is cheap. I guess it’s all relative. We were driving back across the State of Virginia yesterday and stopped about half way and filled up. I did notice that it’s still about $4.19 per gallon for premium here in Northern Virginia.

Everyone knows that are new car loses value the day you drive it off the lot. A used car kind of does the same thing as the retail price is higher than the trade in price. If you tried to use your used car as a trade in the day after you bought it you would not get the same value in most circumstances.

I bought my car in Oct 2005, it’s a 2004 Saab and I got a really good deal on it. New the car is right at about $30,000 and I bought mine a year old for about $18,000. Fast forward a few years and I now owe about $6500 on it. I financed it for about three and a half years and then refinanced it about a year later at a lower interest rate. My car should be paid of completely in about a year if I were to continue making the regular payment on it.

Right now my car trade in value is around $8000 so for once I actually have some equity in the thing. Out of curiosity I check what the value was for the same exact car was that was just a year older than mine was with what I projected my milage would be in another year. The trade in then becomes $6500 which is what I could expect my car to be worth in a year from now.

So, today I have about $1500 in equity in my car and next year I will have about $6500 in equity in my car. For the next year every penny I put into my car I could expect to get back from it. We did but the extended warranty directly from GM on the car so any repairs it needs will be covered in full right at the dealership. So, my only real cost for the next 12 months is gas and insurance. Insurance is about $500/year and I use about $75/month in gas, or $900 a year.

So many people are considering buying cars that use less gas these days due to high gas prices. My car has a turbo in it so it requires the premium fuel and gets about 20 miles to the gallon which isn’t a whole lot better than some of the SUVs these days. If I bought a new gas sipping car to replace this one I would have to pay on it for the next few years before I starting breaking even and then probably another year before I starting actually getting value back from my car.

We do not plan on getting rid of the Saab any time soon. It’s covered under the bumper to bumper extended warranty for another two and a half years. By keeping the car that entire time we will have saved ourselves over $8000 in payments and our only extra expenses on it will be regular maintenance.

So question to the readers: When are you no longer upside down on your car?

I came across an excellent article by Paul Michael at Wisebread this morning. It asks the question “What will you do when gas hits $4 a gallon?” and responds with “I’ll pay it just like everyone else.”

And you know what? He’s exactly right. For probably 90% of this country, we’ll just suck it up, drink a latte or two less a week, and live our lives as we had been. Let’s face it, most people are not willing to fundamentally change their lives unless gas say doubles or triples from even where it’s at right now. People these days can’t live without gas, electricity, and the internet. They are staples of our everyday life.

Paul also linked a YouTube video that I found fascinating and left me wondering how long if ever that we’ll see something good come from this man’s invention?