auto

Tough choice: Refi or pay down loan?

Dear Terry,
I am currently two years into five-year financing on my car which is starting to have mechanical and electrical problems. Repair bills plus the high payments are killing me, so I'm thinking about dumping it. The problem is I'm about $2,000 upside down.

Should I:

Refinance my car and keep it until it's paid down or paid off?

Get rid of it now and lease something?

Get rid of it and finance a less expensive vehicle?

-- Laura

Dear Laura,
The big question here is whether you have $2,000 to bring down the loan so it equals the value of your car. That's the best course of action -- pay down the loan and sell the car to get a less-expensive vehicle. If you can't do that, then refinancing may be your best option. But don't buy or lease a new vehicle and roll over your existing balance into that loan. That will just put you in a deeper financial hole.

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