‘$8k left after car totaled. Pay off cards or put down on new vehicle?’ Facing a financial dilemma after insurance payout. What would you do?

Hi Money Minder,

So my wife’s car got wrecked in a tornado last week (crazy, right?). The insurance is giving us $14k and some change for it. After we pay off the loan and the deductible, we’ll have about $8k left. Our initial thought was to pay off a few credit cards and not put any money down on a used car loan. I even considered just buying a used car outright but the prices in my area are through the roof!

My wife drives a ton for work and needs something super reliable. Plus, we could save about $400 a month by paying off some cards and a small loan we have. On the other hand, we could save about $100 on the car loan if we put money down. We’re planning on paying off the car next year when we sell our house anyway, so the $8k would really help us get closer to that goal.

What would you do in our situation, Money Minder? Any advice or ideas would be greatly appreciated.

Thanks a bunch,
Dave from Tornado Alley

Response from THE MONEY MINDER:

Hello There,

I am sorry to hear about your wife’s car being totaled in the tornado. It sounds like a challenging situation, but it’s great that you are already thinking ahead about how to make the most of the insurance payout. Given the options you’ve mentioned, it seems like a wise choice to use the $8k left after paying off the loan and deductible to pay off some credit cards and a small loan. By doing this, you will not only save money in interest payments but also free up some monthly cash flow, which can be very helpful in managing finances in the long run.

Considering your wife’s need for a reliable vehicle due to her extensive work-related driving and the high used car prices in your area, it might be more practical to save the $100 on the car loan by not putting anything down and focusing on paying off the high-interest credit card debt now. This way, you can improve your overall financial situation and move closer to your goal of paying off the car next year when you sell your house.

In the end, it’s all about finding the right balance between immediate financial relief and long-term financial stability. Paying off high-interest debts will save you money in the long run, while also allowing you to build a stronger financial foundation for the future. All the best from THE MONEY MINDER.