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Reduced Income - time for lower car payment?

jetsfan2013
Frequent Contributor

Reduced Income - time for lower car payment?

I recently had a reduction in income due to a job change, which has me re-evaluating my monthly budget. The total household income has dropped roughly 40% since whenI purchased my current car, and while the payment and rate are "affordable", getting some breathing room by getting a lower monthly payment could make more sense.

 

Current car - owed 17k 51 payments left 370 mo

possible replacement - 8500 (will speak with same credit union who did the first car loan) bankrate.com calculator puts a 36 mo term payment at about 255. Insurance premium over 6 months is about 100 less.

 

Any thoughts or advice appreciated!

In the garden until Summer 2021
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CreditDunce
Valued Contributor

Re: Reduced Income - time for lower car payment?


@jetsfan2013 wrote:

I recently had a reduction in income due to a job change, which has me re-evaluating my monthly budget. The total household income has dropped roughly 40% since whenI purchased my current car, and while the payment and rate are "affordable", getting some breathing room by getting a lower monthly payment could make more sense.

 

Current car - owed 17k 51 payments left 370 mo

possible replacement - 8500 (will speak with same credit union who did the first car loan) bankrate.com calculator puts a 36 mo term payment at about 255. Insurance premium over 6 months is about 100 less.

 

Any thoughts or advice appreciated!


It is a good idea to look at any way you can to reduce your expenses.  I especially like that you are considering the insurance cost of the replacement car and you wish to reduce the term of your loan. 

 

I am not qualified to offer advice on swapping out cars for a lower payment.  However, there is some information you will need to provide to anyone who can offer better advice. 

 

1) How much is your current car worth?  For example, if it is worth 15k when you sell it.  That will mean your replacement car loan will need to be for 10.5k or you will need to come up with cash to make up the difference.  You credit union may or may not be willing to finance you depending on how far above NADA it comes to.  As a practical manner, it may mean you have to trade in at a dealership and get less trade in value.

 

2) How old and how many miles are on the replacement car?   CUs have different requirements on the age and miles of the cars they are willing to lend money for.  Used cars loans have a higher interest rate in general.  But over a certain age/miles most CU's will not offer loans. The age of the car can also influence how long of a term the CU is willing to offer.  If the replacement car is a new car, obviously this is not a concern.

 

The last couple of questions are more for you to think about and less for whoever can offer better advice.  

3) What are the chances the replacement car require more repairs than the old car?   If you have a major car repair how will you pay for it?  Of course, this would apply to your existing car if it is out of warranty.  Or could be a big plus if the replacement car comes with a warranty.

 

4) Does the replacement car get better or worse gas mileage than your current car.  Be sure to include gas usage in your calculaitons.

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