Tips on Buying Cars: Upside down, diapers etc, relationship breakup

Question
Ok, 20 months ago I bought a truck.  I have poor credit due to a past relationship/breakup. I was on the rebuilding side and needed a reliable vehicle for my current wife.  Well I bought it for a wedding gift (high interest) and it was ok to me because we made way more than enough money and it was going to help rebuild my credit.  Well June of last year I had a baby.  Lets just say daycare, formula, diapers, etc. took more of the budget than we expected and we have struggled ever since.  The only major bill we have is rent and the truck (which the payment is too high now) and the gas mileage is killing me as it is a Z71 crew cab.  I can't afford this truck anymore, but I have to have something reliable for my wife and kid.  I'm around 8k upside down on it.  I have been tempted to trade it in, but putting that much money on another car note is going to end up putting me back in the same boat.  I have thought about letting it go, but that would kill my credit, as I have jumped it up 60 pts since purchasing this truck.  What do you recommend?

Answer
Hi Kevin,

Your situation is nothing new, even though you may feel you're the only one going through this series of unfortunate events.

When you're trying to pay-off an already high interest loan and the vehicle itself increases in expenses it becomes a nightmare.

It sounds like you're really trying to better your credit and raising it 60 points is great. The one thing I would suggest would be to somehow increase your earnings, or decrease your expenses. If possible, try to pay additional money each month towards your truck payment. Anything you send over and above your regular payment can be applied to the principle of the loan, therefore reduces the amount of payments. This is all fine and dandy if you can swing it...most of the time good, hard working folks can't swing it.

There is another option, one I am not recommending...but as a last resort. If you qualify for another car loan without trading in your truck, secure the loan and make the first payment on your newer vehicle. Allow the truck deal to go back to the bank. If you continue to make your payments on time with your newer car, after few years, this will all be behind you and hopefully you be established with the newer vehicle. This Kevin I am not really recommending, only as a last result. It will tarnish your credit, it will lower your score...but keep up the newer vehicle and pay ahead if you can. This will allow you the breathing room you need until your child grows older and your money is not so stretched.

Good luck Kevin!

Doug