Purchase new vehicle or lease prior to filing?

[huffydogg]

I am filing chapter 13 next month, I already retained my attorney, and I will have to surrender my audi Q7 due to the large payment of $760 per month. My payback will be 2% ($150 a month) on $130,000 credit card debt, and I have been debating whether I should purchase a new camry, payment of $450 a month, or lease a suv under my spouse's c corporation? I am in California, and my wife is not filing. I would rather have a suv, even though my payment will be $600 per month, but I have three children, one is in a car seat, and my other children play soccer, I always carry chairs, umbrellas...... What would you recommend I do?

[NoTomatoCan]

Perhaps you should look at more modestly priced vehicles or a used vehicle 1-2 years old. Remember, you will get to knock down the interest rate on your loan to the local Till rate if you get the loan before you file. That means about a 5%-6% interest rate, depending on your district. To still stay under the $489 IRS standard vehicle ownership costs that works out to a car priced at about $25k. That is still a pretty good vehicle! Not an Audi Q7, but would put you in a good SUV.

And if you are going to continue to do a lease, you need to understand that you will likely have to address getting a new vehicle sometime during the life of your plan (unless it is a 5 year lease).

As you are aware, too high of an expense might get an objection. Hard to say if $600 is still to high, but at a 2% payback, I would suspect that you get a closer scrutiny...

Whatever you do, just make sure you do it before your credit gets too trashed and definitely do it before you file to avoid that headache.

[huffydogg]

Hi NoTomatoCan,

Thanks for your response, but if I were to lease a suv with payments of $600 a month, I wouldn't include it in my expenses since the lease would be under the name of my spouse's corporation, but if I were to purchase a car below $498, I would definitely include it in my expenses. I am just debating what to do?

[enginegirl]

I turned in my beloved BMW X3 in May and Purchased a New Mazda CX7. I was able to finance thru Chase at a 7% interest rate 5 year loan (not the best but better than nothing, I had been turned down by my bank for a car loan). A point to remember New VS Used.... New cars have usually have a 3 year warranty which can be extended to 5 (the length of most 13s) so no need to worry about major repairs just standard maintenance (Maybe buy the maintenance plan and put that in the payment too).
I filed June 19th, had my 341 this week with no objection to my $350.00 car payment. Confirmation hearing is set for October 6th.(21 more days, barring no objections!!)

Remember the higher your allowable expenses are the less your monthly payment to the trustee will be....

[NoTomatoCan]

If you don't include it in your expenses, that $$ just goes to your general unsecured creditors, right? So you would pay X into the plan per month and have it include a lower priced vehicle or pay X into the plan per month AND pay $600 per month outside the plan via your spouse's corporation for a slightly higher end vehicle.

That seems like an easy decision to me...

[huffydogg]

If you don't include it in your expenses, that $$ just goes to your general unsecured creditors, right? So you would pay X into the plan per month and have it include a lower priced vehicle or pay X into the plan per month AND pay $600 per month outside the plan via your spouse's corporation for a slightly higher end vehicle.

That seems like an easy decision to me...

Yes, that makes sense. Thank You

[momofthree]

Ditto NTC, buying is the better option.