My wife and I have built up about $28K in credit card debt over the last 4 years. We are finally getting serious about budgeting like crazy and put together a plan to pay it off in 3 years. We were given a 36 month loan at 3.25%. We will make payments of $832/month. Are only other debt besides our mortgage is our car loan. We bought the SUV in 2009 and our payment in $530/month. We have 2 years left to pay it off. Blue book value is approx. $20k and we currently owe $13K. Our other car is totally paid off and we will keep it for at least another 100,000 miles.
Should I pay off the SUV and keep if for as long as it lasts? The other idea I had was to sell it, and it should net around $6k – $7k. This could be put directly towards that debt we are working to pay off. We then would need another car, so I was thinking about a 3 year lease. I would find something with $0 down and a payment of no more than $300. Does this scenario make good financial sense for our situation?
If you sell the SUV for $7K will you have enough money on hand to pay off the loan and release the title for the buyer?
Selling the SUV and buying a more fuel efficient used car would make the most financial sense. Look for something that is about three years old.
Leasing is nothing more than long-term car rental with some added liabilities built in. If you want to rent a car and get nothing in return at the end of the rental period, that’s a choice you need to make. I think you’d get some value out of reading this article, Should I Lease My Next Vehicle?
If you wanted to hold on to the SUV but lower your monthly payment you could always just refinance the SUV and stretch the term out. Overall you’d pay more but reduce your monthly obligations.
A critical factor here is if you are able to save money each month while you are implementing your debt reduction plan. Make sure saving is a part of the plan. Putting all your eggs into debt reduction only leads to trouble.
Please post your responses and follow-up messages to me on this in the comments section below.