When we went from two incomes to one, we had to make some major changes in our finances. We tried our best to stretch what little work-from-home income I was making and what the hubs was bringing home.
It wasn’t easy paying expenses that were covered by two incomes, so we had no choice but to make cutbacks and dowgrades.
And we made a lot of them.
We cut back on how many nights we had take out. Downgraded our mobile plan and removed the premium channels from our cable package – as long as I got Lifetime and Hallmark, I was okay with that move, hehe.
Many of us have financial problems. It could be the mortgage, student loans, or credit card debt. But what happens when you cannot afford your car?
Our biggest expense at the time was my car. We had to do something with it because we were stretching ourselves way thin to make the payments. But trust me, I held on to it for as long as I could.
Here are some options that are available if there ever comes a time when you can no longer afford your automobile.
How Much Should You Be Paying for a Car?
Another recommendation is to only purchase a car that you can pay off in 3 years. Many people think of car payments as a monthly cost, which is fine, but that monthly payment should be high enough that you can pay off your car in 36 months. If it’s going to take longer, the car is probably more than you can reasonably afford.
What Are the Alternatives When You Can No Longer Afford Your Car?
Sometimes consumers choose a car they actually can afford and then their life circumstances change like ours did.
Divorce, losing a job or any dramatic change to your financial situation may mean that you can no longer afford your vehicle. Of course, you don’t want a black mark on your credit report if at all possible. So what can you do?
Consider Trading Your Car in for One You Can Afford
Start by going back to the dealer from whom you originally purchased the automobile. Car dealers want to keep return customers, so the original dealer may be the most amenable to facilitating your trade in. Try to trade in what you have for something you can actually afford and pay off in 36 months or less.
Check your mailbox, there are always inserts with invitations to buy your car back.
This, however, is not always an option. New cars depreciate quickly, and it’s possible that you may owe more on your car than it is worth. In that case, you may have to explore other options.
Sell Your Car
Another good option is to simply sell your car, pay off your loan and then shop for a new car, one you can afford. If you cannot sell the car for the amount that you owe, consider taking out a personal loan to pay back the difference.
What ever you do, DO NOT try to finance the difference using a credit card. This can easily lead to bigger financial problems you don’t need.
Refinance Your Loan
A third option to consider is refinancing your car loan. You may be able to refinance at a lower interest rate, cutting your monthly payments significantly. You may find that your financing company’s representative may offer you a higher interest rate and a significantly longer loan.
While this may cut your monthly payments, you’ll end up spending more in the long run. It may not be the best move financially, but it may be what you need to do just to get by.
What If You Lease?
If you have leased your car, rather than having financed it, you don’t have the options of selling or refinancing. You can return the car and break your lease, but you will have to pay substantial fees.
If possible, it’s best to find someone willing to take over the lease on your automobile in what is called a lease transfer.
Worst Case Scenario?
The reality may be that you cannot afford a car at all. Consider using public transportation or riding a bicycle wherever you need to go. Transportation is a necessity for most of us, but transportation doesn’t have to equal an automobile depending on your lifestyle.
Even when you buy an automobile, remember that while transportation may be a necessity, all the upgrades are not.
Over to You
I know struggling to pay the bills can be a real stresser. The last thing any of us wants to do is downgrade. It feels like you’re taking a step back and that sucks. But there is a silver lining in all of this – well at least for me there was.
I never thought we’d be in the position we were in but it was the wake up call I needed. I learned to appreciate what I have and most importantly I learned how to manage our money better and not to live beyond our means. Because just like that, it can all change.
I hope you found these options helpful.
Have you ever had to trade in or sell your car because of hard times? What did you do? Tell us in the comments section below.
If you know anyone who can use this information please share it with them.