Dear Dave,

My wife and I are trying to decide how to buy a new truck. We have a net worth of about $2.2 million, so we can afford to buy it outright. She thinks it would be smarter to get a zero-interest deal, put the money in an interest-bearing checking account, and just have the payments deducted each month. What do you think?

David



Dear David,

You’re certainly in good enough shape to absorb the butt-kicking in depreciation that comes with buying a new car. It’s not what I’d do, but I’ve got no problem with folks buying brand new vehicles with cash once they reach millionaire status.

It’s a great time to buy a truck if you can deal with the pain at the pump. The bigger ones are gas hogs, so prices have dropped way down. You should be able to save thousands of bucks right now.

Do some Internet shopping, and really wear down the salespeople. Don’t just show up on one dealer’s lot and flash your cash. Then, when you find the one you want at a good price, cut a check and be done with it!

– Dave



Preserving the

friendship



Dear Dave,

I’m about to buy my first home. My plan is to buy a duplex and rent out the other side to help pay down the mortgage quickly. A friend of mine wants to be my renter, but I’m worried that this could jeopardize our friendship. How do you feel about this kind of thing?

Jerry



Dear Jerry,

This can work, but the odds aren’t in your favor. You need to be really careful. When you do business with friends you always face the risk of running into a situation that can damage the relationship.

Does this mean you can never do business with friends? Of course not. I do a lot of business with friends. But I make sure that the specific requirements of our relationship are laid out very clearly, in writing.

It would be a good idea to make sure he understands that he has to come talk to you ahead of time if there’s even a chance that he might not make the rent one month. Most problems can be worked out, but you’re not running a charity. This needs to be emphasized in a kind-but-firm manner.

Sometimes friends have unrealistic expectations on both sides. The friend who’s renting may think he’ll get some slack on the payments, or the friend who’s the landlord may assume the renter will be a model tenant. These dangerous myths need to be addressed and ironed out before anything is signed.

You can make this work, Jerry. Just be straightforward, and make absolutely sure the rules are understood by everyone involved. Then, when you have to, enforce them!

– Dave

Co-signed into

bankruptcy!



Dear Dave,

My wife co-signed on a loan for an ex-boyfriend five years ago when they were together, before we even met. Now a collection agency is after her. Our attorney has recommended we take Chapter 7 bankruptcy, but the debt is only $5,000. Is there a better way?

Jeff



Dear Jeff,

You bet there’s a better way! It’s just plain stupid to even consider trashing your financial life over $5,000. Bankruptcy stays on your record for years!

This is an old loan with very low expectations for collection. The collector probably bought it for next to nothing, and everything he gets will be profit. It’s not uncommon for debts this old to be settled for fifty cents on the dollar, and sometimes a whole lot less. Haggle with them, and I’ll bet you can talk them down to $2,500.

Get an agreement in writing before you send them a dime, and DO NOT give them access to your bank account. They’ll threaten to sue, or ruin your credit and that kind of stuff, but my guess is you can work this out. It may take a couple of weeks and some patience, but that’s nothing if it will save you $2,000 to $3,000.

You guys will have to pay some Stupid Tax on this one, but I hope it will teach you both a very valuable lesson. Never co-sign a loan!

– Dave





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