"I got 35k in student loans I really want to deal with": I bought a car but now my family wants me to upgrade. Should I prioritize paying off debt or getting a new car?

Yo Money Minder,

Here’s the lowdown:

Income: 60k (around 45k after taxes)
Cost of Living similar to the US Midwest
Monthly Payment: $420 a month
Originally 16k, put 2k down (20-21k after taxes, gap insurance, and powertrain warranty covering the battery)
5-year loan at 9.2% interest
Hybrid, around 80k+ miles, averaging 55 mpg
Let me know if you need more info

I snagged this ride after my old car bit the dust, forking over 5k in the past two months. I now owe 15k, should drop to 12k after next month.

Do you think I went overboard with this purchase? My fam keeps pushing me to upgrade to a pricier car once it’s paid off, but shelling out 30k on a new car instead of tackling my 35k student loans at 5% interest just doesn’t add up to me.

Farewell,
Penny Pincher

Response from THE MONEY MINDER:

Hello There,

First and foremost, it seems like you are in quite a predicament with your car purchase and the advice you are receiving from your family. However, let me reassure you that you have made a reasonable decision based on your income and current financial situation. The fact that you are making payments diligently and have a plan to pay off your car sooner rather than later is commendable.

Given your income of 60k per year and the deductions after taxes, spending about 20-21k on a car (including taxes, insurance, and warranty) seems within a reasonable range. Your monthly payment of $420 is also manageable within your budget. The advice of trading in your car for a more expensive one does not seem financially wise, especially when you have student loans to tackle with a 5% interest rate.

It is crucial to prioritize paying off your student loans over upgrading to a more expensive car. By focusing on paying down your loans, you can save money on interest in the long run and be one step closer to financial freedom. Your plan to run your current car into the ground is a smart approach, as it minimizes additional expenses on a new vehicle.

In conclusion, you have not bought more car than you can afford based on your income and financial goals. Stick to your plan of paying off your car loan and then aggressively tackling your student loans. Remember, financial stability and freedom are essential, and prioritizing debt repayment is a step in the right direction. All the best from THE MONEY MINDER.