Help, my car just quit on me - Page 4

thumper1 · 10-30-2009, 05:37 PM

DadII..do NOT (I repeat...DO NOT) touch your retirement account. Even as a loan, any money you take out of there will NOT be earning any interest towards your retirement benefit. The last thing you should be touching is your retirement accounts. Ask a financial planning expert. I'm sure they will agree.

You will have TWO kids in college for the next two years. DO NOT put your self in the position of having any more monthly payments. Buy something you can afford to buy. There are plenty of decent used cars on the market. Start looking for one of those if you can't fix the current car(s).

When your kids are out of undergrad school, treat yourself to a new car.

jym626 · 10-30-2009, 06:07 PM

Was your car in gear when it died or in neutral?

bluebayou · 10-30-2009, 07:40 PM

Quote:

Even as a loan, any money you take out of there will NOT be earning any interest towards your retirement benefit.

While off point, I don't think it is that simple. The withdrawn funds do in fact due earn interest bcos you pay it to yourself. The "interest" charged against the 401(k) loan ends up back in your own account. Essentially, it's the same as investing in a fixed income fund. Of course, one does lose out on any "market" gains during that time period, assuming one has their 401k invested in the stock market.

While borrowing against a 401K has risks, lack of earnings is not one of them.

google it and you'll see.

thumper1 · 10-30-2009, 07:57 PM

The above post explains it better than I did. BUT the reality is that the retirement account will NOT be growing in the same way as if the money in the account was left intact.

2boysima · 10-30-2009, 08:43 PM

Hope this isn't a ploy for DadII to figure out whether or not car payments will lower EFC and allow family to get even more funding from Stanford and new school.......

Dad II · 10-30-2009, 09:26 PM

2BS, you are pretty low on this one. If I were to do something to get more $$ from Stanford, I would have done that before renewing the css by 4/15 this year.

To jym626 #47. It was in gear. Are you a transmission specialist?

jym626 · 10-31-2009, 12:58 AM

^^ No, not a transmission specialist, but if a car is in gear when the transmission dies, it usually won't move at all, even with gravity on your side. How'd you get it down the hill to your house? It is my understanding that that would only work if the car was in neutral.

BunsenBurner · 10-31-2009, 01:03 AM

Dad II, whatever you do, please don't touch your 401(k)!!!

ucsd_ucla_dad · 10-31-2009, 02:23 AM

Quote:

... it usually won't move at all, even with gravity on your side. It is my understanding that that would only work if the car was in neutral.

An automatic when in gear can be moved without the engine running because of the torque converter. This is why there's a special mechanism, a parking pawl, to 'lock' the transmission and hence the driveshaft from turning when the transmission is in Park. Without the lock, the transmission can still turn despite the engine not turning, due to the torque converter. This is also how the engine can idle while the transmission is in drive but your foot on the brake. The torque converter is essentially a fluid coupling between the engine and transmission (and then on to the driveshaft) which allows one end to turn while the other end doesn't when at low RPMs. This is also why you don't leave the auto gearshift in anything other than 'Park' when parked - especially on a hill since if the emergency brake isn't engaged the car will roll downhill if not in Park.

If the car has a manual transmission you're mostly correct except if the gears were very low, like those in reverse are or a 4wd vehicle in 4 lo range might be, it could be possible for it to be moved although it'd be difficult unless it was downhill. Again, this is why the emergency brake should always be enaged in a manual when parked. It should be on an automatic as well in case the parking pawl doesn't engage correctly as has happened with some cars or if it's worn.

Dad II · 10-31-2009, 11:07 AM

Thank everyone. We just sold the car to a happy Ford mechanics for the asking price of $2000. Apparently this DOHC engine is a very desirable engine. It turns out, we are due to pay the car tax in Nov, this way, we save a couple of hundred $$ too.

Now, the next task is to buy a car this weekend. wish me luck.

bluebayou · 10-31-2009, 11:14 AM

Quote:

BUT the reality is that the retirement account will NOT be growing in the same way as if the money in the account was left intact.

That is IMPOSSIBLE to to say. And in fact if you can say it with absolute certainty, you should be day trading from your yacht in the Carribean!

Unfortunately, most people have waaay too much 401k money in money market funds. Borrowing that money back actually makes that money grow faster since MMF rates are paltry, and much lower than the typical interest rate charged to a 401k borrower. Historically, stocks do much better. But, if you borrowed last year at this time, you would also be much better off since the market tanked since then.

Of course that means market timing clairvoyance, which gets back to my yacht comment.

thumper1 · 10-31-2009, 11:52 AM

bluebayou...you sound like you know vastly more than I do about borrowing from the 401K. I have been advised by two financial advisors to do this ONLY IN AN EMERGENCY where I cannot get funds elsewhere. They both said...it would be prudent to repay any borrowed money ASAP to keep my retirement funds and growth intact. They remind me all the time that my retirement accounts are LONG TERM investments....not short term.

Perhaps DAD II is in the position to borrow against his 401K without any financial issues. I don't know that. BUT I do suggest he talk to his financial planner BEFORE he borrows against his retirement accounts.

jym626 · 10-31-2009, 12:05 PM

It is the end of the month and dealerships will be clammoring to move cars off their lots. Plus, they are probably enticing new car buyers with low interest rates, which they will claim is a better deal than leaving one's $$ in a low interest bearing account or the volatile market. They will do a very fine job of convincing people in DadIIs position, who need a car NOW/TODAY to drive one (preferably a new car, not a trade-in, off-lease or employee car) off their lot. Waiting to see what it is that makes it home into his driveway, and what his monthly payments will be.

oldfort · 10-31-2009, 12:50 PM

This is getting back to the leasing option I brought up. Even if you were to drive more than 20,000 miles per year, as long as you purchase the car at the end of lease you may still be better off.

As an example, if you were to get a car for 25,000, the residual value is 15,000, then you would be financing 10,000 at 0-2% rate, and at the end of lease term you would pay 15,000 to purchase the car. If you were to purchase the car, you would lose earning interest on 15,000 for 3-5 years. In essence, you are paying full 25,000 for the use of the car instead of 10,000.

I have leased and purchased cars. Of course the car I purchased, I really dislike it and wouldn't mind giving it back to someone. It was my H who told me to buy instead of lease.

thumper1 · 10-31-2009, 01:52 PM

OK...I'll ask. DAD II...what cars are you considering in your search? New or used??