I am a 23M resident of Florida for starters. In October, I mindlessly traded in my older vehicle for a 2025 Toyota Tacoma SR5 at a price of about 42,000. I am currently on a payment plan of a fixed 6% interest rate of 84 months – my monthly payment is $695.
Back then, I was working a manager job at a hotel that I hated, but made about $55,000 a year at. In February, I ended up quitting that job and starting a new one with a worldwide known luxury hotel brand, but took a $10,000 pay cut in salary as this new position better sets me up to make more money down the road doing something I’m passionate about. With my current budget, I can still afford my car payments each month, but it’s very tight along with rent which is about 1420 a month, plus groceries and car insurance. Im only saving about $200 a month and can’t even contribute to my 401K.
Let’s acknowledge one thing first – it was a horrible mindless and impulsive decision. I have always wanted a truck and saw the “perfect” opportunity in that moment, and it has forever changed my perception of my personal finance. I’ve accepted that, and I am motivated to move up and onwards from this.
I have no other debt than this truck, and I have about 77 months of payments left towards the principal amount of $41,000. Some days, I think about biting the bullet and continuing my payments so I can refinance in a few months from now. I have a near 800 credit score, but I feel making more payments over time is helpful before even thinking about refinancing.
Other days, I think about selling it for what it’s worth ($33k according to KBB), and accepting the negative gap of 7-9K$ temporarily. I haven’t done this because I don’t have enough saved up to get another car, and getting another loan to consolidate that debt would be idiotic.
I am really hoping to hear what many of you would do if you were in my shoes, made a terrible but recoverable financial decision. Is it worth it to stick it out or to just rip the band aid off and move on? Any feedback or advice genuinely helps and is appreciated…
Got myself into a 84 month car loan of $42K, feeling financial pressure as I try to grow in life
byu/Grubnation66 inpersonalfinance
Posted by Grubnation66
25 Comments
I see two logical options- attack this loan with every dollar you can get your hands on. That means side hustles, OT and living like a hermit.
Or.
Sell and get away from it as soon as possible.
Either way you’re most likely spending money.
Often the reaction to a bad situation is worse than the situation itself. Your proposed solution doesn’t sound appealing to me.
Can you move home and pay it off in 18 months?
You need to up your income, I’m sure someone else will have a better opinion than myself but to me you need to get another job / a better paying job. At least you’re still saving something every month at the moment!
Not a great decision, but the silver lining is that the interest rate is “OK.” Could be worse.
Keep making payments and try to get ahead on being underwater. Make sure you have gap insurance while you are.
Refinancing will not really help; 6% is about the best you’re likely to get:
https://www.nerdwallet.com/auto-loans/learn/average-car-loan-interest-rates-by-credit-score
You’re way overextended on this truck. I make like 150k+ and granted am the sole breadwinner of our home (wife+ 2 kids) but we have a paid off 2018 crv and a paid off 2012 Ford focus. I’m looking to sell the focus and buy an f 150 from 2015ish with 100k+ miles on it for just the utility of having a flatbed. Wife used the focus as a daily commuter for years though.
Even before the crv was paid off my car note was half of yours (bought it in 2020 for 23k). Not to mention your pickup gets terrible gas mileage.
I rarely advise this but in your case I think you buy a 5-10 year old sedan like an Elantra, focus, Corolla etc. and chalk the negative equity up to a dumb decision in your youth. You’ll cut your payment in half and be able to actually save for your future. Also, if you lose your job this truck is going to drown you quick.
At your age and income this is a large financial albatross around your neck, will limit your flexibility (or growth as you put it) for some time. Should have found an older low mileage reliable car for 15-20k less. Pay it off quickly or get rid of it. If I could change anything about my early career I would have maxed out my 401k every year.
The biggest part of the depreciation hit is a sunk cost. That truck will last forever—I’d keep it.
You desperately need a second job.
I don’t think you can afford to take the loss on this vehicle. You have $200/month left over. I don’t know how you think you can just eat the several thousand dollars you’d lose by selling the vehicle.
I think the best course of action is to increase your income with a second job. Doesn’t matter what it is. Stocking shelves. Warehouse. Food service. Retail. You need to bring in additional money to pay down the loan faster, build up your savings, and contribute to your 401K.
Also, you can’t afford to not be contributing to your 401K. Even if it’s not much, you have to contribute now if you want any chance to not be working until you die.
You’re probably not going to be able to refinance a used truck for less than 6%. Plus, if you did it would be a much shorter loan term which you really can’t afford. You made a bad decision but there’s not too much you can do other than sell for a loss.
Im on the mindset of were here once so hell with it. Just get a part time job for awhile to give you breathing room financially. In the mean time dont beat yourself up about your purchase. You wanted one and you treated yourself, try and enjoy it. Good luck!
You definitely couldn’t afford that before you switched jobs, that’s going to be really tight now.
You mentioned refinancing – I’m not sure what purpose you think that would serve here. Usually you’d refinance from a higher interest loan to a lower interest one. Your interest rate here seems pretty normal, so there’s not going to be a lot to gain from it. You wouldn’t really be saving any money by refinancing (there are usually some costs involved). If interest rates nosedive you definitely could, of course.
So the choice boils down to whether you can come up with the $8k or so gap in value and get by somehow, or paying the vehicle off ASAP. This might mean getting another part time job for a while to help put some extra cash into the loan.
I think you’ve got a good perspective on what is useful versus not useful. Getting out of situations like this is never complex, it’s literally just a few years of serious financial pain. Good luck!
We need to teach financial literacy in grade schools, how is this happening.
Up your income and/or lower your rent aka get a roommate.
At 23, I’d look for a roommate living situation to get your rent down.
You are in a pickle.
Do not roll 7-9k negative equity into another vehicle. Your payment will be just as high.
And you would still need a down payment.
My suggestion to you is to hunker down and make some cuts.
Or get a part time job a few days a week and pay that thing off.
You could easily earn 200+ extra a month that can be applied to your principal to pay it off sooner.
Get a 2nd job and put every single dollar you earn there into your car loan.
Man, this is the worst time to bury yourself in a huge loan like that. At 23, making $45k/yr, you should be looking at $10k cars max. I’d look into selling the truck, and/or, trading it in, and rolling the equity into a Corolla and owning the fact that you’ll be paying the stupid tax for a while. At your age, maxing 401k would be simply the most effective lever arm to actually retiring. I hope you can get out of this through someone’s suggestion in here, or figuring out how to make extra money (maybe work two jobs?). One positive aspect of this, is that it is a Toyota and not some shitty car/truck. The situation isn’t the worst, just sucks.
Reddit is hyperbolic. You’re ok; if you can, it’s maybe worth grabbing a second weekend job (a few extra 100$ a month will make a big difference) but 200$ left over after groceries and rent/expenses while not ideal isn’t the end of the world.
You’re 23 don’t stress too too much; if you save 200 a month at your age you’re way ahead of the game.
Go try and get some weekend retail/gym job and make an extra 1-200$ a week and you’ll be able to relax. Don’t let everyone freak you out. Things will be tight for a while but you’ll survive. Definitely don’t stop making your payments.
The main reason a second weekend job would be good is so you can at least get your 401k match.
This sucks but that truck can easily last 15 years. Selling it at a $8k loss and buying a cheaper car doesn’t sound like a good idea to me. Even something a like a newish Corolla which is a pretty sensible car isn’t very attractive if you add that $8k to the price.
Really I’d try to minimize expenses, which means making a budget. Then I’d consider another job. With the extra money you can build a reserve and pay an extra couple of hundred towards the principle owed on the truck
Dude. If you were making $55k a year is a little crazy to get a car that is $42k. Perhaps start with something more affordable and as your income grows get a better car?
You literally are working to pay a car. That’s it…..very little for savings, rainy fund day, shelter and some food….
Option one is save the $7 k and get rid of it with Carmax or Carvana….option 2 continue paying your car with most of your income.
I make 145k and have never had a remotely new truck. That’s a tough spot. Maybe pick up a second job. You don’t want to go 84 months not paying into your 401k and new job isn’t a guarantee of growth yet
You couldn’t afford this care even remotely with the other salary and obviously that has not improved.
Sell it and get like a 5k or 10k car in cash.
I got a loan for nearly identical terms but note is only $545 a month… I wonder what the difference is?