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It is currently Sun Mar 29, 2015 12:33 pm

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 Post subject: Ari's 7 year Car Loan Mistake.
PostPosted: Sat Jan 10, 2015 6:01 pm 

Joined: Sat Jan 10, 2015 3:40 pm
Posts: 1

Hello ~! I have been reading this website for the last few months. I am inspired by the financial stories people share and would like to share my own progress!

My biggest financial mistake has been buying a car I could not afford. Here is how it happened and what I am doing to fix it:

In 2011 - I moved back to my home town from living in a city with great public transportation where I hadn't needed a car for at least 3 years. At the time of the move, I had no savings, no car, no home of my own, no investments of any kind, however I had no debt. Moving home wasn't easy, but I left an abusive relationship and I was willing to start over from scratch without lining up a job before relocating.

Unfortunately, I had a great deal of trouble finding a job once I was back home and was unemployed for almost 6 months. When I finally got a job I felt like I had to take it - just to take anything to get going again. However, it required a 50 mile a day commute / 25 miles one way. Rather than reconsidering taking the job, I thought my solution was to buy a car. I did not have any money to buy a car with cash... so I went to a dealership.

In the past, I had always bought used cars with high mileage but in good condition from people I knew and had never had a car loan. (Cars I previously owned: 1992 Ford Focus/ 1988 Toyota Camry/ 1991 Mazda Navajo.) But this time I went ahead and financed it, thinking that it would be ok because I was finally working again. I didn't have credit tho - I lived most of my adult life under the radar paying cash for stuff and didn't use credit cards (up until I got into debt with my car - that's another story.). The loan company at the dealership put limits on the type of car I could buy, since I didn't have credit.. they said I had to buy something with fewer than 60k miles on it that was no older than 4 years.. and my dad had to co-sign for the loan... I guess so they could resell it in case they had to repossess it... I needed the car that Monday to get to work so I went to the car lot Sunday morning and I left the lot that day with a 2008 Mitsubishi Lancer GTS with 40k miles on it. The price on the windshield said 16k, but I had to pay 21k once taxes and everything else was added on. I thought that bringing my father with me would help, but he didn't know any better than I did.

It took me about 9 months to realize I had made a huge financial mistake. I was having trouble paying my basic bills, even though I was working full time and not spending money on anything but living expenses. I was paying more to keep my car than for rent. I didn't consider the true cost to own: insurance, maintenance, and gas, and I had never calculated the amount I was going to owe for interest. So dumb.

My loan is for 7 years with an 8% yearly interest rate. ... I hate to admit this, but I really didn't understand about the interest, I had to figure it out on my own. I've never taken on so much debt in my entire life. It feels horrible. I wouldn't have done this if I really understood what I was signing for. I can only imagine how different things would be if I hadn't done this.

Once I realized the mistake I had made, I thought about letting the loan company repossess the car... but I couldn't bring myself to do that because that would affect my dad's credit since he co-signed for it... so I have stuck at it and am doing everything I can to pay off the loan.

I moved back home. ALL of the money I would have paid towards rent now goes towards my car, plus anything extra that I can afford. I realize that I am very lucky to have this opportunity to live at home, otherwise I wouldn't be able to pay back the loan.

I've been upside down on the loan the whole time, but I am making progress. I am now at about 7k left on my original 21k loan... for a car that is now worth about 5k. I currently pay about 1k per month on the car payment, trying to beat the interest. As long as I can keep making these large payments, I should be able to pay off my car by July 2015. I make about 1800 a month (but I have $300 a month health insurance paid through my employer!) working full time Monday-Friday 7-4. I have been applying for a second job (weekends and evenings) for the last 3 months but have yet to find anything. I was never a person with a lot of consumer debt, I don't spend money on a lifestyle that I can't afford... but I made a massive error and I am trying hard to fix it.

If I could go back, I would never have bought that car. I realize I need to educate myself to make better financial decisions for the future. I hope to make some positive progress in the months ahead. This is my new year's resolution... to pay off my car loan and educate myself about finances so I can build a future where I do not live paycheck to paycheck forever.

Thank you!!!


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 Post subject: Re: Ari's 7 year Car Loan Mistake.
PostPosted: Sat Jan 10, 2015 7:42 pm 

Joined: Fri Mar 14, 2014 4:10 am
Posts: 159
What an experience. I'm glad you decided to pay off the loan. I don't know much about cars but if it was at least the market value you paid then at least you're not losing anything more than the interest. I faced something similar when I took out my first (and only) car loan at the age of 25. They wouldn't let me finance a car older than 3 years old for more than 4 years (though didn't say anything about mileage)...and that was with a mortgage and 7 years of perfect credit history. I paid it off in 9 months and would have paid cash except that I just bought my house 2 weeks prior and I unexpectedly had to get a car when my 10 year old Mazda died due to my negligence.

Anyway, I say just focus on the positive. You have a fairly newer car and you have a chance to recover by taking care of it and keeping it for far longer after you pay off the loan. At least you recognized your mistake and are remedying it. So many people don't and automatically trade in their cars every few years because they've accepted paying a car note forever as part of their regular monthly bills. IMO you're doing everything right so far.

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 Post subject: Re: Ari's 7 year Car Loan Mistake.
PostPosted: Sat Mar 14, 2015 11:34 pm 

Joined: Wed Jun 11, 2014 5:33 pm
Posts: 104
Hi Ari,

At least you realized you made a mistake. A lot of people go into denial.

I've never done this before, so make sure you do your research, but you may want to look into refinancing the loan at a bank or credit union. Typical auto loan rates are less than 3%. You could save $3-$4000 in interest.

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