My husband and I have an upside-down car loan, which means that we owe more on the loan (about $10,000) than the car is worth (only about $7,000). We are paying a pretty substantial amount each month in insurance and car payments (over $300 a month) to keep this car with 8% interest on the loan.
We can afford these expenses however, we don't use the car. My husband now has a work vehicle paid for by his job and the upside-down car sits unused. We feel silly paying so much a month for a car that goes unused.
We have an emergency fund of $5,000, and a lot of available credit on credit cards (currently no credit card debt at all) if an emergency arose.
We are considering dipping to the emergency fund to get rid of this car. We figure it will probably take us around 6 months worst case scenario to pay ourselves back into the emergency fund.
Is it better to dip into the emergency fund to unload this extra debt and expense or bite the bullet and keep the car while trying to save up money outside of our emergency fund to get rid of the vehicle?