Question: I have a chronic illness and don’t know when I’ll be able to return to work. My husband works a weekend job in addition to his weekly job. We have two car payments. One is $500 a month with 18 months left to pay off the car. Would we be better off trading it in to get our payments down to $300? We tried to refinance it, but the company said no. I’m not sure we can afford this payment on one income. We need two cars because our son just started college. We have canceled our cell phones and have gotten rid of other expenses to make ends meet.

Answer: Before we address trading your car, let’s talk about your son. We all want to help our kids, but when you’re in a budget crisis, you need to make changes. It’s time to assess how much of the cost of the second car your son can carry. We require our kids to pay for their own auto insurance and some of the gas they use. If they want to own a car, they buy it themselves (with cash; we don’t co-sign). While this policy may seem harsh, hard work, delayed gratification and planning never hurt anyone. It’s a great dose of reality and will benefit them much more than giving them things. If your son wants to drive, he should pay. If he doesn’t want to pay, then sell the car. 

Reducing your $500-per-month car payment will require a lot of research and probably some good, old-fashioned haggling. Start by figuring out what kind of car you could get for $300 per month. Also research the Consumer Reports Used Car Buying Guide for reliability information on various models. Then call several dealerships and see how willing they are to work a deal. Go in dealerships knowing what terms you want (total cost, length of the loan and total monthly payment) and be prepared to walk away if they don’t meet your terms.

You also should research insurance (we like to use InsWeb.com to gather several quotes easily and quickly) and registration costs before you buy. Impulsive decisions usually land people in debt. This is time for analysis, research, planning and patience.