I’m deep in debt with credit cards, personal loans, student loans, a mortgage, and a car loan. I’ve made mistakes and have a spending issue. I’m working on paying it down using the snowball method, but there’s barely anything extra to put toward payments. I’ve cut all non-essentials and stick to a strict budget.
My car is one expense I’m thinking about. I bought a new Subaru a year ago and traded in my almost-paid-off car with lots of equity, which was a bad move. Now I have no equity and a bigger payment—$440/month. Plus, I spend $400-$600/month on gas since it only takes premium and gets about 24mpg. I owe $22k, and it’s worth $23-24k in trade-in value.
Should I keep the car, trade it for a cheap used car, or get a less expensive new car? I drive a lot and have kids, so reliability is crucial. I’m also worried about the risk of a used car breaking down since I have no extra funds for repairs. New cars have lower interest rates right now compared to used ones. Any advice?
Selling the car might seem like a good idea, but you’re driving a lot if you’re spending $500/month on gas. A cheap replacement might not hold up and could leave you stuck with costly repairs. Cutting your payment by a hundred or so isn’t worth that risk.
You might need to look at ways to increase income, even temporarily. A second job, even for a short time, could make a difference. Take another hard look at your budget. People often think they’ve cut everything, but there might still be areas to reduce—like skipping takeout entirely or switching to cheaper grocery options. It’s tough, but making sacrifices now could improve your situation long-term.
@Chen
Thanks for the input. I work from home and make a good salary, but I’m already putting in 40+ hours weekly. My husband works overtime and weekends. I’ve tried using my real estate license, but I haven’t sold anything in the past year. I’ve been searching for remote evening/weekend work but haven’t found anything reliable yet.
Groceries are our biggest expense. Even with sales, it’s $300+ a week because we try to eat healthy with dietary restrictions. We’ve already cut out most luxuries—like movies and dinners out—though we do get pizza once a week since it’s cheaper than groceries. I’m also switching to making coffee at home to save more.
Cars aren’t assets—they’re liabilities. My advice? Downsize your car and lifestyle to get out of debt faster. A smaller car payment will make a big difference in reducing your financial stress.
Shiloh said:
Cars aren’t assets—they’re liabilities. My advice? Downsize your car and lifestyle to get out of debt faster. A smaller car payment will make a big difference in reducing your financial stress.
Actually, a car is an asset, and the loan is the liability. Most cars lose value, but equity still exists if the car’s worth more than what you owe. For example, I own my car outright, and it’s worth $35k—that’s equity. The issue is that cars generally depreciate faster than homes. Both are essential for most people in the U.S., but the way they gain or lose value differs. Be careful when considering which debts to prioritize.
I don’t have a car suggestion, but you should check out Dave Ramsey’s snowball method. It helped me become debt-free over 20 years ago. His advice is solid: ‘The borrower is slave to the lender.’ Good luck finding a solution! For what it’s worth, I drive a 2013 Honda Crosstour with 150k miles—no payment, and it runs great.
Trading in for a new car might not solve your problems. Dealers could leave you with even worse debt. Maybe look into refinancing your current car loan. Focus on paying down one debt at a time, and keep Christmas spending minimal this year.
If overspending is a problem, credit counseling could help. It might hurt your credit score temporarily but could stop the cycle of debt. Keep your car for now—the payment isn’t terrible. Consider gas discounts to save more, and sell any unused items at home to bring in extra cash.
@Skylar
Thanks for the advice. I’ll look into counseling. I drive 45 minutes each way to take my daughter to school, but we’re planning to homeschool next year. For now, I’m stuck with these high expenses. I just feel like every time I try to get ahead, unexpected costs like a $1k well repair come up. Should I use my emergency fund for it, or hold off and save more?
@Whit
If the well repair isn’t urgent, maybe push it back until you’ve saved up a bit more. Unexpected costs are tough, but delaying might help avoid draining your emergency fund entirely.
Trading for another new car won’t solve your debt—it just adds to it. Sell the car and get a reliable used one for $5-8k. Get a trusted mechanic to inspect it first. Use any savings to pay down debt faster.
Work extra hours if possible, even if it’s tough. Cut up your credit cards and stop eating out entirely. Skip vacations and pause retirement contributions until you’re out of debt. Discipline now means freedom later.
@Davi
Thanks for the tough love! I’ve stopped contributing to retirement for now, but I’ve been doing 8% for the tax benefits. Does it make sense to stop altogether if it means paying more in taxes?
Whit said: @Davi
Thanks for the tough love! I’ve stopped contributing to retirement for now, but I’ve been doing 8% for the tax benefits. Does it make sense to stop altogether if it means paying more in taxes?
Stop the 8% immediately and put that money toward your smallest debt first. Paying high-interest debt is costing you more than the tax savings from retirement contributions. Once your debt is under control, you can revisit retirement savings.
Lin said:
Have you considered a new electric car? There are rebates and incentives that could make it more affordable. The Honda Prologue comes to mind.
For someone trying to get out of debt, locking into a new car isn’t a good idea.