‘It’s a fourth of your freaking take-home pay’: This Oklahoma man owes $51K on his RAM truck with a payment of $1.1K/month — plus he has mortgage and motorcycle debt. Caleb Hammer responds

Expensive toys = unmanageable debt

Taylor admits he’s between jobs at the moment. He previously worked as a truck driver for the U.S. Marine Corps and was stationed in Okinawa, Japan. A physical assault at work left him traumatized and he now collects Veterans Affairs (VA) disability benefits.

Those benefits amount to $3,832 a month. Fortunately, Taylor lives in an extremely low-cost city. His three-bedroom house cost him just $140,000 and he was able to use a VA home loan benefit to finance the purchase. That means his monthly mortgage bill is just $1,025.

Unfortunately, however, Taylor has a taste for expensive toys. He owes $51,536 on his RAM pickup truck, with an interest rate of roughly 15%. Hammer points out that a whopping $700 of his monthly $1,126 auto loan is going just towards interest.

But that didn’t stop Taylor from buying another toy: a Harley-Davidson Iron 883 motorcycle. He estimates that the interest rate on this loan is somewhere between 10% and 12%, and his minimum monthly payments are $259.

Hammer describes Taylor as a “true American” and says auto loans are “America’s favorite thing to go into debt over.” That’s because overpaying for expensive and often unnecessary vehicles isn't uncommon. Americans collectively owe $1.6 trillion in auto loans (as of the third quarter of 2023), according to data from the Federal Reserve Bank of New York. That’s the same amount as student loans.

Unlike a university degree, however, automobiles rapidly depreciate in value. As of mid-December 2023, used car prices are down 6.3% from last year, according to the Manheim Used Vehicle Value Index (MUVVI).

Over the last year, the number of car owners paying more than $1,000 a month has surged, with many also tipping into “negative equity” on their loans.

Taylor is one of them. He believes his pickup truck is upside down in the range of $5,000 to $6,000, which is why he’s been reluctant to sell it. Hammer, however, believes selling the truck is still the best path forward.

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Changing the game

Selling his pickup truck could completely change Taylor’s financial situation. “I think that’s going to be worth it in the long-run with this interest rate,” Hammer says.

He recommends selling the truck on the private market and getting a personal loan to cover the difference. That should eliminate a substantial portion of his debt and vastly improve his monthly cash flow.

Boosting income is another tool Hammer recommends for better cash flow. Taylor could consider borrowing his girlfriend’s car for food delivery or go back to trucking to generate additional cash. However, he might need to consult an expert to see how this impacts his VA disability benefits.