Dear Driving for Dollars, I am desperately trying to get out from under a high car payment. Due to cutbacks at work, my income is now less than my car payment plus my car insurance. I want to trade in my car for a less expensive car. What can I do to keep from getting myself in the same situation when I trade in? -- L.A.B.
Dear L.A.B., Unless your income prospects are expected to change very soon, the only way to avoid getting in this situation again is to scale back dramatically. Generally speaking, your total car expenses should be no more than 25% of your household income, including your car loan payment, insurance, fuel, repairs and maintenance for all cars in your household.
When you replace your current car, try to shop for one that will fit within these guidelines. To get the most money, sell your current car privately rather than trading it at the dealership.
Buying a car from a private seller (versus a dealer) also will help your dollars go further. If you need a car loan for your new car, get a loan from a national lender or your local credit union. Both types of lenders are likely to give you a better interest rate than you would get through a dealer.