So we have a 2007 Lincoln Navigator that we purchased about 4 months ago (about a month before I found this place and realized that I needed to pull my head out of my derriere). With the negative equity we had in our trade-in vehicle, plus the purchase price of the Navigator, the pay-off amount on the the loan is about $27k. So we have a nice little chunk of money coming (approx $26K) and the wife and I are arguing about how to go about this.

My vote is to sell the vehicle to a private party and pay the difference of the loan so that we can walk away from it and the $500/mo payment. Depending on how the sale goes, I would guess that the difference will be approx $5-7k and we'd obviously be out that money.

My wife's vote is to throw the $5-7k at the loan and try to refinance it. It's my belief that the loan is too new to be able to refinance yet anyway. On top of that, our interest rate is already at about 8% which is pretty good for a used car. I just don't see that $5-7k making that big of a difference to the monthly payment amount if it was refinanced at the same interest rate.

The other vote would be to pay it off completely but then have nothing left over to pay down other debts or to put into savings. My ultimate goal is the not have a car payment and my wife loves her car so she's trying to figure out ways to make it less of a burden, but keep it.

What do you suggest?

My car loan is at 4%, and I think others around here with longer credit history could probably secure 2.99% (though perhaps not on such a large loan on a fuel inefficient car). So, I think 8% is a terrible rate. You should also think about the term of the loan.

I see practically no reason that you need a Lincoln Navigator. If you need a big SUV you could definitely get one cheaper than that. Do you really need an SUV? Probably not if you are driving a Lincoln one.

I'm on the sell that car, pay the loan, buy a more reasonable car bandwagon. I am not a car person, but in my area you can buy a 2007 Jeep Cherokee for about $15,000 and a 2007 Ford Escape for $10,000. If prestige is your thing, I even see a 2005 BMW SUV for $17,000.

You guys are doing great with your debt snowballs, but no one needs to LOVE a car that much. You love people and pets, not things. 27k is too much for a stupid car at a 9.5% interest rate. Lincoln Navigators are simply for showing off, and you guys have no reason to be showing off when you have excessive amounts of debt. I'm not trying to be mean, but if you think about how that looks, you'll realize it's ridiculous to have a Navigator and no running water/electricity.

So I say 'Too bad, wife. We're getting rid of the car. When all of our debts are paid off or at least under control, we will think about getting another one in the future. In the meantime, here is something that is just as nice, and will convince you to take control over your money.'

Hope that helps and Happy Valentine's Day.

Whoa you two...ouch! Maybe I didn't make myself clear enough. I bought the vehicle before I came across this website and before I realized that I was being an idiot and that I decided to take control of my finances. I want to rid ourselves of the vehicle. I just needed help in making the correct decision. Is it smart financially to throw $5-7k or even $10k away to crawl out from under this thing?

It's my wife that wants to keep it. I realize how unnecessary it is!

Ok, so here's one way to convince her. You both must ignore everything that has happened in the past.

Today, you have a car worth $19,000, A loan of $27,000 at 8% (60 months? 72 months?), $26,000 of cash(I'm assuming guaranteed from something), and a need for a reliable vehicle of some sort.

A reliable, relatively fancy, and excessively large vehicle can be had on the used market for between $10,000 and $15,000.

If you keep the current car and pay on your current loan and use the cash for something else, you will pay (60 months at 8%) about $33,000 for the Navigator.

Lets say you use all the money and pay off the loan and keep the car. You now have a car, no loan, and no cash (actually, -1,000 from the additional you had to pay above the cash you had), but at least you didn't lose an additional 6K in interest.

If you sell the car for $19,000, and pay of the remaining $8,000 today, you cut the extra $6,000 of interest lossess over the next 6 years. You now have $18,000 in cash and no car. You can now buy an acceptable $15,000 car (with cash, no interest). You now have $3,000 to pay down other debt, and a reliable car, and no loan.

Which option is better? For heavens sake, even if you use the $3,000 for custom made leather boots, diamond jewelry, and a vacation you're better off! Perhaps to help persuade her you could identify some $15,000 cars.

The info in the other thread is important. From that, no offense, but it's pretty clear you cannot afford this vehicle. Since you got it used the hit shouldn't be all that bad (vs. if you had gotten it new), and a lot of the hit was rolling over your previous negative equity. You can get decent, reliable transportation for maybe 10k, so that still leaves about 10k lower debt.

I doubt you will be able to refinance at a better rate, not because the loan is too new, but just because your situation hasn't changed enough since you got that rate to qualify for a better one.

Ok, I read the other thread where you lay out your debts and say you are in California.

I see, on Craigslist, 2007 Navigators selling for $22k to $28k. Assuming you are in that area, spend 4 hours cleaning the Navigator so it is beautiful and shiny. Try to sell it for the payoff or at least $22,000. You are in an excellent position, because people in LA love to waste money on flashy cars that are unnecessary.

Then go buy one of the many 2007 Ford Escape's available for $11k (or something cheaper if you can live with it and get your wife on board or some other car people know is better- Honda Odysey? Civic? Toyota van?)

Then you have $10,000 leftover from your settlement. (Be sure to talk to someone about taxes). You can pay off all the medical bills and other debts and STILL have $4,000 to put toward savings, Plus no car loan, so an additional $500 a month to put toward the tax bill (2 months), then additional E-fund saving (Looks like once the debt is paid off your expenses are about $3k a month, so maybe 4 months to get to a 2 month fund), then Disneyland Annual passes (4 months)!

OK, annual passes might not be a good choice. But perhaps a reward after 6 months wouldn't be a bad idea. Then back to increasing the emergency fund to 6 months of expenses and then saving for cash for the next car.

If it were me I'd pay the loan off first, then try to sell. If a vehicle is paid off when you go to sell you'll have less obstacles to deal with.

I haven't seen the other thread referenced, so i will check that out in a minute.

May I ask where the $26k comes from? Is it an inheritance? A gift? If it's a gift it might be subject to taxes.

For perspective: When my wife and I were pulling ourselves out of debt I had my car die and got $600 for scrap/parts. I bought a new car for $100. That's right, a hundred bucks. It ran but it wasn't very fun at all. That's the kind of sacrifices needed to get out of debt. And let the uncomfortable-ness of it remind you not to be stupid again.

You got $600 for a non-working car and paid $100 for a working car? Score! on both counts.

You really have two issues here. The first is, do you keep your car or sell it and go for something far less expensive. That's a choice only you can make. I haven't seen your other thread.

The second issue is, if you are keeping the car, do you 1) keep the loan and do something else with the windfall, 2) pay it off with your windfall, or 3) refinance and do something else with the windfall.

Can you refinance (are you creditworthy and have enough income to support the payments)? If so, do you need liquid cash for an emergency or to pay down other debt? If the answers to both are yes, you should refinance. 8% is a really, really high rate for a secured loan (even though it is undersecured) these days. You are paying almost $200 per month in interest alone, if you want to look at it that way. Nearly $6000 in total interest assuming your loan has another 5 years on it.

If you can't refinance, but you really need the cash for something else, you might have to keep the loan. But I would say that if you are in that position, it's time to reevaluate whether keeping the car is still a good idea.

If you don't need the cash, by all means pay off the loan. You can always change your mind later and sell the car.

It gets even better: I drove the car for two years and sold it for $1000.

A coworker of mine walked to work and they hadn't driven the car for months and was going to junk it. It was a beat up Chevy Cavalier stick shift. I'd never driven stick before so I googled the night before how to drive stick. But I told them since they were going to scrap it that if I could get it started and drive it around the block I'd give them $100 for it.

Granted, I had to put about $500 into it (rotted tires and some other issues.) so it was even with the $600 I sold the scrap car for, but two years later we had a baby in the house and the $100 car wasn't going to be safe for an infant. So craigslist and $1000 later the car was gone.