by Tricia
The Carnival I hold close to my heart (Carnival of Debt Reduction) is over at Money Under 30. As usual, lots of great information over there, but one article hit close to home.
When Car Debt Turns Really, Really Bad brought me back in time almost 5 years ago.
We were looking to trade in our truck and buy a new vehicle. I had looked at the Kelly Blue Book value of our truck and I couldn’t believe it. The value of our truck was less than the amount we still had to pay on our loan. It wasn’t a large amount, but enough to make you feel uneasy when you want to trade a vehicle in.
We found our current car, and waited for the trade-in offer on our truck. They would pay off our loan in full and that was it. Since I did the research I was happy with that. But part of me wishes we didn’t extend our financing on the truck for so long (6 years). The few extra dollars a month would have provided some downpayment on our current car. But at the time, you don’t really think about it. We learned a lesson, and we bought our car under a 5-year loan. Not the best, but definitely better than a 6-year loan.
In September, our car will be paid off and it will still has value! Part of it probably has to do with it being a car that is known to hold its value well, but another big part is that we didn’t go for a longer term loan even though they offered it.
Of course, I hope to pay cash the next time we buy a newer used vehicle, but if we can’t we are getting the shortest term loan we can (hopefully 3 years).