 Dear Terry,
I have a 2004 Toyota Highlander that I bought new. I have made the payments for the past three years, and still owe $15,500 over the next three years. It has only 30,000 miles on it, so it is worth $3,000 to $4,000 more than what I still owe. The payment is $480 a month and that does leave things very tight at the end of the month -- more than we would like.
I drive about 10,000 miles a year; I live within five to 10 miles of everywhere I need to drive to. We make about $70,000 combined per year; my house payment is $600 a month. Does it make sense to sell the car to buy a smaller used car, for around $16,000 or so, that still fits our family and financing it for five years to have a cheaper payment (but maybe not as nice a car)? Or should we consider refinancing our car for five years to lower the payment (add two more years, for a total of eight years of payments)? Or should we consider ourselves lucky to have a nice SUV, and muscle through the next three years of payments, and then try to drive it longer to have zero payment? Please help. I don't know what would get us more ahead.
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Lauri  Dear Lauri,
Strictly in terms of what will get you "more ahead,'' sticking with the original loan is still the way to go. If your driving needs continue as you describe, you'll have a paid-for vehicle with about 60,000 miles that should continue to give you good service for at least another 30,000 miles, if not more.
If the size of the payments is keeping you awake at night, then perhaps you may want to consider selling the SUV and buying a late-model sedan. Assuming you can clear $3,000 from selling the Highlander and use that as a down payment on your hypothetical $16,000 used car, your payments for a typical five-year loan would be about $255. If you shortened the term to four years -- which would mean you'd be in debt only a year longer than your current loan -- the payment would be about $309, considerably less than you're paying now. The one thing you shouldn't do is refinance your current vehicle and stretch out the payments over a longer period. Not only will that result in higher interest costs, but you'll still be making payments at a time when you may want to consider a new vehicle.  | | This week | | | | • | Cash discounts on SUVs outweigh gas prices | | • | Stretching payment time seldom smart | | • | 'Certified' means pricey in used cars | | • | Fight back against shady dealer |
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