How do I take on these financial burdens, step by step?

February 15, 2008 9:15 AM

My crappy car was deemed totaled and I'm going to accept the payout and finance a new used car. I'd also like to move into an apartment soon. Step by step, how do I wrangle this plan into fruition?

Current situation: I co-own an old Corolla with my mom and I'm listed on her insurance. I was in an accident and the at-fault driver's insurance is taking the claim. I went in for an estimate and they said they're considering it totaled and will contact me with an offer. I'd like to take the payout (guessing ~$800) and finance a reliable car for around $10k. I have good credit for my age, $4k in credit debt, $15k in student loans, no savings. I pull in about $1300 per month after stu. loan payments. I live with my mother (so no rent, but I pay utilities and groceries). I'd like to move out within a few months.

So my three financial changes are: finance new used car, move auto insurance to my own account, and eventually get a modest apartment.

My questions: Step by step, what should I plan on? How much cash I should have available, and at what point for each step? Since the car's financing is adjustable, what downpayment/monthly bill/contract length should I shoot for? How can I handle the car handover so I'm not carless at any point?

I've only recently developed the confidence to strike out on my own, and these problems are one of my biggest sources of anxiety, so any help on these points is deeply appreciated.

posted by cowbellemoo to work & money (11 comments total)

How about used car? You can get very reliable transportation for a couple of thousand dollars and not get yourself another ten grand in debt.

Find a car on craigslist. 1) No interest 2) no dealer markups
posted by sandra_s at 9:30 AM on February 15

If I had my just-moving-out-to-my-first-apartment years to do all over again, I probably would skip the stage where I financed an $8k used pickup truck. Those payments were hard to make on $1400 take home a month, along with my other bills.

Take that $800, buy a beater, and live well.
posted by M.C. Lo-Carb! at 9:46 AM on February 15

Honestly, I'd stay home with mom and focus on paying off debt. You don't mention where you live, but your $1300 free cash after student loan payments isn't going to go far on your plan. Figure on $250 a month or so for the car note, another $500 or so for rent, that leaves you $550 a month for groceries, utilities, cable TV, DSL, dates, movies, etc, etc. And all of that with no safety net because you don't have any savings.
posted by COD at 9:51 AM on February 15

You need to sit down and make a budget before you spend any money. It seems like you are already living beyond your means ($4K in credit card debt) and now you want to increase your expenses (car payments, apartment). Add up the expenses you would have with the apartment (rent, utilities) and car (insurance, gas, maintenance, finance payments) and for other things (food, entertainment, clothes, etc.) and then match those to your income. You will probably have to adjust your car purchase price downwards so that the finance payments don't eat up too much of your income.

You also need to get rid of your credit card debt and build up a small buffer of cash. If you can stick to the budget you prepared, but live at home and apply what you would pay for rent to that debt, you should be able to pay it off in a relatively short time. Wait a month or two longer before getting an apartment to build up a little bit of a buffer if you can.

If the car can still be driven, ask the insurance company how long you can drive it around for. Around here, the insurance company gives you a month before totalling your car, but only your insurance company can tell you how long you have. Once you find that out, you can move forward with the rest of your plan.

Is there any possibility that you could live without a car if you move into apartment (i.e. somewhere central in whatever city you live in)? $1300 a month is not a lot of money to live on once you pay for all the expenses related to a car.
posted by ssg at 9:54 AM on February 15 [1 favorite]

How can I handle the car handover so I'm not carless at any point?

Aren't you carless right now? Or is your "totaled" car still driveable? If it is, I don't see why you would ever have to be carless.

Also, how much are apartments in your area? Are you going to live by yourself or with roommates? Do landlords typically require one month's rent plus security deposit before you move in?
posted by Dec One at 9:56 AM on February 15

You might try holding out for more than the $800 their insurance company is offering you for your totaled car. The value the other party's insurance company has assigned to the car's value is simply not in line with actual replacement cost for reliable transportation.

Bottom line is you're not at fault, and you are entitled to more than 800 regardless of the condition of your POS. consider 800 their first lowball offer, especially if you can wait them out on the claim.
posted by freq at 10:07 AM on February 15

The value the other party's insurance company has assigned to the car's value is simply not in line with actual replacement cost for reliable transportation.

Seconded, emphatically.
posted by Civil_Disobedient at 10:38 AM on February 15

Financing an additional debt now will only delay your independence. Financing rates won't be good (assuming a relatively short credit history), and though you could lower your monthly payment load by stretching out the loan term, don't do this, as your loan may outlive the car. Frankly, I don't think any amount above $0, given $1400/mt budget will able you to live independently.

If it were me, I'd 1)first make sure to negotiate a good compensation for the totaled car. You're probably being offered at most the blue book value, which is usually below what it would cost to replace with a similar car(on preview, as others are saying) then, 2) carefully find a private party sale used car, 3)Save. Completely pay off the credit card debt. Save up at least 3 months of projected living cost as emergency savings, keeping in mind that many living expenses will cost more when you're on your own without that cost sharing benefit of being part of your parents' household(such as multi-car discount, and cost benefit from sharing a auto insurance policy with older, experienced drivers.) You may need additional savings for housing security deposit, and first+last month rent upfront conditions, etc., so add that to the necc. savings amount.
posted by MD06 at 11:01 AM on February 15

Wow. Excellent reality check, everyone.

I'll revise a few things: Yes, the car is drivable. Unless the estimate uncovered frame and other damage that would make it unsafe, all it really needs is a new headlight and a fix to the slightly crumpled hood. I'm just guessing at the insurance offer, and I know so little about this, but it seems it would be much higher than my first guess of $800 if they're supposed to give enough to buy a replacement instead of reimburse the actual value. I've read this thread and I'll try and get my insurance company to squeeze a reasonable price out of the at-fault person's insurance. I guess I have to let them know I want to keep the car and have the cosmetic damage fixed, going through salvage and reinspection (as explained in that thread). I wanted to avoid that hassle alltogether and use it as an opportunity to finance something newer, but I realize now that was a bad impulse given my debt.

I'll also table my idea of moving out, and put $500-600/mo. towards my credit card instead. I'll work out the rest of a budget as well, since my impulsive spending is just tying my hands for bigger moves (car, appt.). It seems really obviously bad in retrospect, but I was just conflating this independence with the idea that taking on a bigger debt would wring the responsibility from me somehow.

Anyway, thanks. I know budgeting is an oft-explored topic here, so I'll stop ignoring those posts and look them up. If you happen to have any favorite strategies for weening a credit card spender on to cash/checks and a fixed budget, and want to share, feel free to post here or mefimail me.
posted by cowbellemoo at 11:49 AM on February 15

Oh, and appts. here are really expensive. $650-700 for a studio. I'd like to find a roommate, but I've got social anxiety and that's just sort of a whole other post.
posted by cowbellemoo at 11:55 AM on February 15

If the only problems with the car are the headlight and the hood, then you should be able to get the car repaired for quite little money. If your insurance company thinks that the car is worth less than the cost of repairs, you just need to lower the cost of repairs or make them think your car is worth more than they say it is. Once you get an actual estimate for the damage, you can see if it can be done cheaper by using scrapyard parts and not bothering to re-paint the replacement hood. Try to think of reasons why your car is worth more than the average car of the same model and year: did you recently replace any major parts (new clutch, new tires, etc.), does it have lower mileage, and so on. Find out the lowest price that your car can be repaired reasonably for and then try to negotiate upwards the value of your car until it is higher than that cost.
posted by ssg at 12:23 PM on February 15