Saving for an auto down payment vs paying off CC debt?

[Anonymous]

I wasn’t sure which forum to put this in as it’s about an auto loan/down payment and paying off credit card debt and which is the best route to take.  So, I’m sorry if this is the wrong sub for it.

Short version:

I need to get a new car as soon as I can afford it.  Due to circumstances my savings have been drained.  I’m under water on my current car loan by around $4k.  So, I’ll need to save at least 5k to pay that off and then put some sort of down payment on the new car.  My credit score is between 650-680 depending on what site I use (Credit Karma vs my CC’s score vs my bank’s score).  Right now, I’ve allocated $600/month to savings with an additional $400 that I can either go towards paying off things or to add to my monthly savings.  Right now I can get prequalified through Capital One.

Long version:

I bought a new car a few years ago, usually I don’t buy new, but I decided to spoil myself.  Final price was just over 25k out the door, so not all too expensive but the most expensive car I’ve bought.  I usually drive cars for 6-8 years, so my plan was to be driving this for 5+ years at the very least which is why I bought new.  I put on 75 miles per day just driving to and from work Monday through Friday.  Because of this I was out of my warranty due to mileage before the years.  Past few months I’ve been having some problems with it where the things that were out of warranty, I drained my savings on, thankfully the engine replacement was under warranty (yeah, some major problems going on with this vehicle, it’s hopefully now good to go for a while yet). 

I want to get out of this thing as soon as possible due to the mileage I put on and how many issues I’ve already had with it.  Problem is I’m under water on it by about $4k with no more savings (and I had to use around $1k on CC’s – this is in addition to the CC debt I already have).  My credit score is between 650-680 depending on what site I use (Credit Karma vs my CC’s score vs my bank’s score).  Right now, I’ve allocated $600/month to savings with an additional $400 that I can either go towards paying off things or to add to my monthly savings.  Right now I can get prequalified through Capital One.

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So, my question is, should I put that extra $400 towards savings so I’m saying $1k a month or keep things how they are and use that $400 to pay things down?  Or is there another option that I’m not seeing - Like for the first two months use that $400 to pay down that CC by $800 and then after that switch to $1k/month for savings? 

I know that if my car decides it doesn’t want to wait then it will force me to make a decision.  Also, I do plan on subscribing to the $20/month plan here once I have some savings and get closer to actually purchasing. 

[Brian_Earl_Spilner]

It's hard to give comprehensive help without the numbers.

Cards, limits, utilization - depending on where they're at, it could be quick and easy to get scores higher to get you a lower rate on the new loan. The savings on the rate could offset the amount you put towards the debt. On the other hand, it may not help at all and you could be better off putting the money towards a new car.

What car are you trying to buy - depending on car, you may need to put a larger down payment to keep you from being upside down again because of depreciation and rate.

[Anonymous]

The quick answer to that is the vehicles I've been looking at will be between 6-9% on a 60 month loan right now through Capital One Auto (I did a 72 month on my current vehicle - I've learned).  I'm mainly looking at Toyota and Honda as they don't depreciate as much as my current vehicle did.  To give a bit more info on that, bought a 2017 new in March 2018 for $25k, the dealerships I've spoken to (3 in my area) are right around $14k in trade in value.  The $5k down was the minimum, if I could put down more I would - just the next thing that goes wrong in my current car will be all out of pocket...a currently empty pocket.

[KLEXH25]

Hi @Anonymous 

Can you tell us what your current CC debts are? List each card balance / credit limit. We can let you know which ones will help to pay down with the money you have available.

[Brian_Earl_Spilner]

Yes, need your credit card balances and utilization. Depending on car and rate, $3% could save you more than $3500 so knowing those would help determine if getting your score higher, or putting more money down would be better.

[M_Smart007]

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@Anonymous wrote:

The quick answer to that is the vehicles I've been looking at will be between 6-9% on a 60 month loan right now through Capital One Auto (I did a 72 month on my current vehicle - I've learned).  I'm mainly looking at Toyota and Honda as they don't depreciate as much as my current vehicle did.  To give a bit more info on that, bought a 2017 new in March 2018 for $25k, the dealerships I've spoken to (3 in my area) are right around $14k in trade in value.  The $5k down was the minimum, if I could put down more I would - just the next thing that goes wrong in my current car will be all out of pocket...a currently empty pocket.

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I would not do a 72 month on a car loan, you know how much interest that adds?

[M_Smart007]

My friend just bought a brand new car at 0%, after He calculated 3.99% on the used car ..

He got a brand new car with factory warranty and no miles for the same payment!

You have to calculate and dig deep. The deals are out there.

Good Luck!