Question about a car....

[UghUghUgh]

I searched for this but all I keep coming up with is related to AFTER bk, my question is in regards to PRIOR to bk. Here is my question...

I have about 7-8k equity in my vehicle because I have been paying $100 extra for the past four years or so. I only have 6 payments left! So, I can either keep it as it is almost paid off and reaffirm OR I can trade it in on a new car. My vehicle is an 06' with 118k miles and the body is about perfect as well as the interior. It needs to be serviced, have brakes and there is a problem with the driveshaft that I was told would cost $1k for parts alone but I could choose to drive it as it is. Which is what I have been doing.

My question is.....In looking at cars it seems that the base rate has gone up since I last bought a car. How much is TOO much to pay for a car before bk? I want to do it before my credit is ruined. My lawyer said it was fine for me to do it. I'd just like your opinions as to the dollar figure that would be 'acceptable'. I am not looking at a Mercedes just a nice Honda, but base rate is like 25k.

Whatcha think!?

[Pandora]

well - first off, you need to calculate the payments on a car that is 25K - as well as what your ins. premium would be currently and following filing BK if you are in a state that allows credit profiling for insurance purposes. Everything depends upon your salary and what you can comfortably afford. Remember new cars break down as well, so you would have to consider purchasing the extended warranty as well - and oil changes tire rotations, etc will still need to be done. Consider a rental vehicle - they have already depreciated in value, and ususally are required to have 10K or less on the odometer to be sold - or you could look at last years model. Depreciation is a witch..

Now weigh the options of owning your car currently - and putting in 1K to fix it, take what you would be making on a new car payment and save up for a hefty down payment on another car in a year or two (or three). 118K isnt alot of mileage really, especially if its all highway and the car has been maintained well.

[despritfreya]

There is nothing wrong with you trading in the vehicle and purchasing a newer one. But the issues if you do so are at least twofold.

1) If your current car is worth $8k the dealership is probably going to give you a "trade-in-value" of say, $6K therefore your equity cushion in the new auto will be $6k. Is this fully exempt in your jurisdiction? If so, no problem. (Granted the value of the new auto drops once it is off the lot and therefore the equity cushion will be less but it is something to think about.)

2) Can you afford to take on the new auto payment? Right now you owe zippo. No monthly payments. I will assume you qualify for a 7 both for means testing and Schedule I&J and therefore do not need this new secured creditor in the mix. This question only you can answer. Nice to have a new car but not having a payment may be even nicer.

Des

[backtoschool]

I traded in a paid off saab convertable and bought a new hyundai elantra six months before I filed bk. I did that as part of my bk planning. I lost about $2k of equity in the trade in, and then several thousand more once I drove the car off the lot, but I was able to exempt my equity in the hyundai, when I would not have been able to exempt all of my equity in the saab. If you pick the right car, and can afford the car payment, you could protect your equity if you better in a lot of cases if you roll it into a new car. Also, you will have to reaffirm the new car payment, so it has to be something that you can afford easily.