Wwyd?

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My 97 Kia Sephia has been holding on with super glue and a prayer for a while now. It's trade in value according to KBB is $100. The front passenger door is stuck in the locked position due to a stupid car burglar, none of the seat belts in the back work correctly. Luckily my daughter is thin and can make the one work for her but we can't give anyone a ride. It needs a new axle and shocks for sure and other things are also about due maintenance wise. I paid cash for it when I bought it and put the money into it over the years with no regrets since it kept it running and I didn't have a car payment. I have a good and honest mechanic who says he will make sure it is always running for me but he thinks it's time for me to upgrade as it really is not safe for us anymore. It's perfect for someone like him who has the time and know how to do all of the work. I'm thinking of selling it to him for $1 in exchange for labor on another vehicle.

I'm expecting $4700 in reimbursement for moving expenses for my job and a $500 state tax return. I was going to put it all into another vehicle but I think it's best to pay off my $600 owed to Federal taxes and $951 student loan balance and get that done before the automatic stay is over. If I'm really careful with the budget and we make some sacrifices I will have about $4000 even for another vehicle.

I've done a lot of searching and it seems that the most reasonable pre-owned vehicles for me are in the $5-6000 range. With $4000 down I could easily get financing for $1-2000 with a decent interest rate and low payments. I really don't want any car payments at all but I think I would do it if they were under $100 and could be paid off in a year. I'm trying to put money aside into savings each month, even if it's just tiny bits like $25 and if I have a car payment under $100 I can still do that. I'm budgeting for worst case scenarios like the company I work for going ch 11, doing more layoffs or paycuts. I'm looking at what my budget would be if I were on unemployment. If I were to get laid off there is also a severance that I could use to pay off the balance of the loan right away and stretch the rest to pay the other basic bills and food costs as unemployment would only cover my rent.

I also want to rebuild my credit post bk but without credit cards. I prefer to pay cash for everything but eventually want to own a home.

This is scary for me since I'm just getting myself out of debt for the first time in my adult life. I won't have student loans anymore or any of the other things that have been dragging me down for almost 20 years!

So what would you do? Would you finance $1-2000 for a vehicle to be paid off in a year with low monthly payments and add something positive to your credit report? Or just go with what you could find for $4000 and stay on the "cash only" path? Again, I have a great mechanic who will make sure everything is running smoothly on whichever vehicle I choose.

[StartingOver08]

JMO, I would pay the $600 for the Federal Return. I would continue to make on time payments on the Student Loan as that establishes credit after the BK. In fact, it shows a long tradeline that has been paid before, during and after your Bk - all good things.

As to car payments, in my opinion only, I would get a vehicle in the $3000 to $4000 range and pay cash for it. It is terrific you have mechanic you can trust - that is so rare today! With the credit markets the way they are now, it is best to own your car outright. Take what would be your car payment and put that away into a savings account for emergency funds. If you do that every month, you will have quite a bit of savings within a year or so.

If you want to establish credit, go to a CU, open a savings account. When you have about $1000 in savings either get a secured installment loan and repay it or a secured credit card. This will help to re-establish your credit but keep you away from the subprime creditors. Of course, this is just my opinion.

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Thank you for your food for thought! This is one where no clear answer has hit me yet so I appreciate all of the advice.

The student loans do have to be paid off before the automatic stay is over. They were in collections and have been garnishing my wages at the full 25% for the past 4 years. I spoke to them last week and they said under no terms other than full pay off will they back off on the garnishment after the automatic stay. There is absolutely no negotiating with them and they know they are in a position of power.

I do have a CU savings account. Not much in it right now ($300) but like I said, I'm just putting small amounts in there now where I can.

[StartingOver08]

Oh, I didn't know about the student loans. That changes things. I am surprised that the Student Loans have to be paid off before the Automatic Stay is finished - but if that is the case, then you have the funds to do so.

I still would be leery of jumping into a monthly car payment in this credit climate. But I certainly understand your needing a car that runs!

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Well, they don't have to be paid off before the stay is over, but I'd rather do that than have them attack my paychecks again. That whole thing has been a nightmare for 15 years that I want to be done with. They're ruthless!

I'm looking at one dealer that buys repo's and rental fleet cars at auction. They all come with a detailed carfax report and because of how they are obtained by the dealer are a couple thousand under KBB value. They have a few that look good to me for a long term investment that have 24-48k miles, full maintenance records and 1 owner reported by carfax for $5900. The KBB value on them is around $9000 so I don't know if I could negotiate much less on them.

The car I have now still runs well.. It's just all of the creaking that has me believing one day I'll hit a pothole in the road and the whole thing will collapse around me. I'll be sitting there with a steering wheel in my hand like Fred Flinstone ;)

[oii]

I drove a tow truck for a few months and I have seen how Kia Sephias hold up (both generations, 94-97 and 98-01). I'd want to be rid of it as soon as possible as well, regardless of mechanical condition. A lot of Sephias run through insurance auctions branded HAZMAT for a reason. Not to scare you, just, well...to scare you.

$4000 will buy a lot of car through a private party these days. What may be on a dealer lot for $5999 with an artificially inflated kbb value of $9000 is easily found through classified ads for way less. Take my wife's truck. 2000 Dodge Durango. KBB value of $5300. We paid $1700 on eBay. We had it shipped to us for $200, found out the engine was bad, then spent $1300 putting an engine in it. For $3000, we have a $5300 truck. Of course it needs a radiator and a handle for the seat recliner now. But we've put 9000 miles on it in the last 3 months and it has been great for her.

I did a quick search of the CL in our area. If you like the Kia and want another, keep in mind they redesigned it in 2005 and it's a much nicer car then. 2005 models sell for well under $5000 and they are much better built than the 90s models.

http://en.wikipedia.org/wiki/Kia_Spectra#Second_generation_.282005-2009.29

One of my friends bought one coming out of bankruptcy in 2007. Brand new. Put NOTHING down except an overheating 1985 Pontiac Parisienne they had bought during their bankruptcy for $700 cash to have basic transportation. She loves it, and it's half paid for now.

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Haha! The only thing I like about the Kia is the gas mileage. This thing was put together with superglue. Everytime I hit a bump in the road a screw falls out and I don't know where it came from. I keep them in the arm rest in case I ever figure out where they go.

In Los Angeles and really all of Southern California, cars are priced different. A hunk of crap like my Sephia will get me $100 if I'm lucky or I'll have to pay someone to tow it away. I actually thought about donating it to Jewish Family Services but I think G-d might smite me for that.... Other vehicles that are "newer" come with a bigger price tag according to kbb than they do in the rest of the country. My mechanic would like it for the parts. When he fixed my alternator he found that they don't even make the bolts for it anymore and constructed one of his own.

I'm looking at the PT Cruiser. I've been checking private sales and dealers. The private sellers aren't going much lower than most dealers and the one dealer that I've been looking at goes lower than all of them. We'll see. I'm not rushing into anything. My Sephia is running for now and if it breaks down, public transit in LA isn't that bad.

My biggest thing is whether or not financing $1000 would be a good way to start building my credit. I don't do credit cards, even though they'd be nice to have in emergencies. Let's face it, very few of us ever would use them only for that. In fact the banks don't want you to have them for only emergencies and will close your account if you don't use them. I'm torn because I like being on a cash only basis and outright owning my belongings but I also want to work towards home ownership and know that I need at least one positive thing going on my credit report.