Q:Background: We are in debt pretty bad and 5 mo. ago (accidentally) had our second baby. We refinanced our second mortgage to try to free up some money to pay for the added daycare expense (went from $118/wk to $223/wk). We’re still having some overdrafts (covered by bank from credit card) as we try to work out the budget.

My husband’s car is running down (’90 Tercel) and he just paid $675 for new tires and brake work on it (stupid – it’s probably not worth much more than that).We bought my car new in ’98 with a loan from his employer’s credit union. We thought it was a 5 yr. loan and that’s why he had all that work done on the Tercel so it could hopefully last one more year. We just found out it was a 4 yr. loan and the last payment ($169 every 2 weeks payroll deduction) will be in May.

Here’s my question: when the car is paid off, would it be better to try to keep his car running until it is dead and use the money to pay down the debt or take advantage of the great deals and low interest rates on cars these days and get another car?

A: I’m glad for you that you discovered it was a 4-year loan on your car instead of a 5-year loan. What a nice surprise. It seems to me that you might want to take advantage of some of the great deals out there. Consider buying a nice 2 or 3-year old used car (car dealers are overloaded with used cars now because so many people traded in to buy a new one at the end of last year) using cheap financing available from your husband’s credit union.

While it would be nice to pay down debt, your husband needs transportation. So buy a used, but reliable car, that doesn’t cost much but doesn’t need much work either. Get cheap financing from his credit union, and cut whatever other corners you have to be able to pay down some of your debt.

Published: Sep 19, 2003