I purchased a bmw 3 series back in 2020 when I was making more money and the cost of living was way lower-- now fast forward a few years: I was laid off at the end of 2022, went on unemployment while also working various part-time, seasonal, contract gigs as I was having major trouble finding full time employment. I also had to move back into may parents house. As of January 2024 I am finally employed full time again. I am on the track to making somewhat close to what I was making back in 2020, except the cost of living has significantly increased since then. I am desperately wanting to get back into a position where I can get my own place again, but I feel like this car payment + insurance is holding me back.
I currently owe $16k on the car. Monthly payments $487 (interest rate was 15% bc it was my first ever loan of any sort and didn't have any previous credit history, at 25 YO.). The total amount financed was about 22k. So in 3 years I've only managed to pay off 6k of the principal, even though I've PAID quite a bit more. My insurance rates have also been INSANE the last year, $350+ a month.
(Already looked into refinancing and couldn't get a much better deal so not interested.)
I looked into trading in my car for something cheaper like a used kia or something with low miles, I was prequalified for payments around $200 a month. With my trade in value/down payment, the financed amount would be about $9k Not sure what the insurance would be like yet, but assuming lower than a financed BMW.
Although the difference from $16k to $9k might not be worth much to some-- it is a substantial difference for me. Cutting my debt almost in half.
I'm wanting to make the decision too as I know the car market can be volatile and I would hate to lose the current offer I have. (I was offered way less about 2 months ago.) But I'm struggling because I just don't want to make an impulsive decision (like buying a bmw back in 2020 lol, i know i know). I just want to know your opinions on if it would be a smart idea to trade the car in for a cheaper option. Ideally, since I am currently living at home, I'd like to make some extra payments toward the principal in order to pay the car down faster and I just feel like that will be a lot more doable with a smaller loan amount. I feel like I'm drowning. The maturity date for my car loan is March 2027 and I don't think I can handle making these payments for that long either. My initial idea was once I became full time employed to make double payments toward my bmw, but that plus the insurance would be like almost half of my monthly income and it just feels irresponsible having the car at this point.
Would love any opinions or suggestions on what to do. TIA
original posted by Unable_Respect4002 to r/personalfinance on Fri, 01 Mar 2024 03:49:18 GMT.