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Just blew all our cash on fellowship interviews, wife\'s car is now dead. Help!

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  • Just blew all our cash on fellowship interviews, wife\'s car is now dead. Help!

    I'll be finishing residency next year and just went through the fellowship interview process. 15 places and way too much money in spite of doing as cheap as humanly possible short of sleeping in a car. As we were headed out of town for memorial day weekend (actually had a weekend off!) with the car loaded up and kids in tow, my wife's car gave up the ghost. $100 tow later and now the mechanic is telling me anywhere from $2600-$3450 to get it back up and running (it's only worth $2500 running). The issue is that my wife's car is 15 years old and we've already replaced the motor once during medical school (don't ask). Since I'm freshly tapped from interviewing, we are in quite the pickle and I am evaluating various sources for getting her some wheels to last the next few years.

    Our financial situation is okay considering all we've been through. One of my children had some significant medical expenses (think 3 years of maxing out your HSA contribution, and spending another $7k out of pocket each year) and that has really limited our ability to save much of anything. We bought a house because overall it was cheaper than renting.

    Here's the quick and dirty:

    Paltry salary: $60k

    Undergrad debt: $0

    Medical school: $290k

    Private relocation loan: $23k

    Mortgage: $135k

    Credit card debit: none

    Credit score: 796

    Medical debt not currently reported to a credit agency (being handled by the hospital): $2k

    I recently received a mailer from my mortgage lender for HELOC or "advance" on the same which I am assuming is some sort of hybrid between a home equity loan and a HELOC. For the HELOC, they want a 70% CLTV, which with a current ballpark of $230k, would be about a $25k maximum loan.

    They also sent me a mailer for a residency/fellowship loan, with interest only payments and up to $50k. Who knows what rate they will want for that.

    My thoughts/questions for the wise of WCI are as follows:

    1. At this point, it seems to me that this car is not worth saving. I may get $500-1k out of it from a junkyard.

    2. Since it's not worth saving, should we:

      1. buy used (and roll the dice)

      2. buy a new car (even with those kind of loans, not something we would want long term)

      3. lease



    3. Loans from family/friends are kind of out.

    4. What are your thoughts on a funding sources? Should I pursue the HELOC, the physician loan or a standard car loan?

    5. What do you think is most likely given my debt to income ratio?


    Thank you in advance for helping me figure out the best way forward

  • #2
    Need more info. What is your monthly savings (ability to build up cash)? Do you have anything saved in cash anywhere? Any other transportation options? Another car? Anything you get in a mailer is probably not in your best interest. New car is out of the question. I would suggest getting a super cheap used car with some margin of reliability (Honda, Toyota). Should be able to find one for a few thousand.

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    • #3
      Buy something used.  Looks like you have enough debt to worry about.

       

      Can you moonlight or she work?  I wasn't sure if the $60k was a combined salary or not

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      • #4
        Thank you for your thoughts.

        Ability to build up cash: Not much of significance. Maybe a $150-200. As I mentioned above, I am still paying the bills for my child's medical expenses and that takes 1st seat.

        Cash built up: No. As I said, just finished interviewing at 15 places for fellowship.

         

        This was a car with "some margin of reliability" and having worked in the used car industry prior to medical school for a number of years, I am a bit leery of something for a few thousand bucks. The chance that something will need to be replaced/worked on, and that we are in the exact same position is not negligible.

         

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        • #5
          Moonlighting is not an option right now, though there is a reasonable likelihood that it will be in fellowship.

          Salary is $60k for me. She occasionally makes a little money working with some designers, but this is not a reliable stream of income.

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          • #6
            So how are you getting around now? Rental from your insurance? Do you have another car?

            You're going to have to play the odds and take risk either way. If you don't want to risk it on an old $2K Honda then a $5k one and your credit should easily be able to get you a manageable monthly payment. But again, do you need it or can your wife drive you to/from work for a time period to build up an E-fund and cash for a new used car of your choosing?

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            • #7
              My car is at 178,893 miles and is reasonably reliable. In theory she could drive me to work, but she would have to wake up my two young kids, throw them in the car at 5am and then pick me up whenever I'm done regardless of bedtime...my marriage would not do well.

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              • #8
                Is biking to work an option?

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                • #9
                  I did that all through medical school but sold my commuter when we moved for residency. I have missed that bike. It was a sweet set up flat bar road style bike with full wrap fenders, hydraulic disc brakes, cyclocross tires and panniers. I also sold my road bike because the place I live in is not particularly bike friendly (and I have been hit before).

                  I live 20min out by car, so it is not really very practical considering that, how gnarly the hills on the way home would be and how unpredictable the weather can be.

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                  • #10
                    Bike to work. Carpool. Let your wife drive you to work Think outside the box (and can anyone come up with something better than this tired, old cliche’? Suppose I need to be more creative myself). I realize hindsight is 20:20 but I hope others in training who are reading this story will take to heart the need for an emergency fund when money is tight - especially when money is tight.

                    This seems like a game-stopper, but it isn’t. I know of many couples who have survived on one car, even in small towns, and have lived to tell the story.

                    One More Year. You will live through this and you will have a humorous story to pass down to your children and a great teaching moment for future residents.

                    I wish you good luck and hope you will post your solution here when you are past the crisis.
                    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      Public transportation? Carpool with other residents? If none of those things are options then I'd probably get the used car that combined reliability and reasonable monthly payments.

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                      • #12
                        Have any friends or family with an extra car you could use even for a few months?

                        If not, just buy a decent used car.

                        Oh, and maybe get an opinion from another mechanic.

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                        • #13
                          Just throwing some other options out there:

                          E bike

                          Scooter (depending on traffic and road speed)

                          Carshare programs like enterprise and zip/uber for emergencies and bad weather. Not economical to do every day.

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                          • #14
                            IMO, I don't think you have a choice but to find a used car and get a loan.  You need to focus on doing a good job at work and not BS like car trouble.  If it were me, I'd start searching Honda dealers for a certified used Fit or Civic or even an Accord if you need a bigger car, though the fits are pretty roomy inside.  They are cheap, reliable as ************************, and come with a 7 year certified pre-owned warranty (better warranty then their new cars).  My wife and I have a certified pre-owned Fit that I bought with 600 miles on it for 14k.  You could easily find one with a lot more miles on it for under 10k.  Try to get the cheapest interest rate you can obviously.

                            From this point forward, keep an emergency fund on hand for this exact reason  And when you get done with fellowship and start making the big bucks, come back here so we can all guide you through paying off all that debt in the most efficient manner.

                            Also, do not take out a HELOC for a car.  Ever.

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                            • #15
                              I know I'm the minority on this site, but sometimes a different opinion is nice to hear. In your situation (assuming you need a second car and biking to work isn't feasible), I would without a doubt lease. You can get a Honda Civic for 179 bucks a month. A low-end accord is $239 a month, and that is what's advertised (before haggling). If you go with a Kia or something like that I'm sure it's barely over $100 a month.

                              The biggest issue with a lease, or at least my biggest issue, is that in 3 years you will likely have nothing to show for it. It's like renting an apartment in a sense. There are of course exceptions, but in 3 years you're either going to have to pay off whatever is left, or lease a new--inevitably more expensive--vehicle.

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