MW I have $50,000 in credit-card debt after my divorce, but received $30,000 after a car wreck. Do I buy a used Lexus?

By Quentin Fottrell

'I previously drove a fully loaded BMW X7, and driving a used Lexus feels like a big drop'

Dear Quentin,

After four years of separation and divorce, I finally am officially divorced and I'm happier than ever. But it cost me financially. Then six weeks ago, a man hit and totaled my almost-paid-off vehicle. The insurance gave me a $30,000 check. I have about $50,000 in credit-card debt from my divorce.

I think I should pay off the debt with my $30,000 cash and use a loan from my credit union to purchase a vehicle. The one I saw today is a preowned vehicle for $37,000, but my neighbor will give me $5,000 off, so it will cost me $32,000.

The credit union said the interest rate for a used vehicle is likely going to be 9.9%. Mathematically, it looks to me like purchasing this used car for $32,000 at a 9.9% APR and using my $30,000 cash to pay off the highest-rate credit cards is the best option financially.

My other option is buying a car for cash and figuring out my credit-card debt separately. I previously drove a fully loaded BMW X7 (XE:BMW), and driving a used Lexus (JP:7203) feels like a big drop, but I'm open to finding another vehicle. What would you do?

Divorced driver

Related: 'I was mentally and emotionally drained': During my divorce, I made a hasty decision to take early retirement. Can I undo this?

Dear Divorced,

The big drop in status happened when you incurred $50,000 in credit-card debt.

I know this came after an expensive and probably traumatic divorce, and a new car might make you feel like "you" again and remind you of your old life, but it's time to stop thinking about your financial or social status in terms of what car you drive - that is, what other people can see rather than what they can't see (your monthly credit-card bill).

I'd focus on getting rid of that $50,000 credit-card debt. I'd drive the cheapest piece-of-crap jalopy I could find, and I would love that car like it was the first car I'd ever owned and treat it like a Bentley, because those four wheels were getting me from A to B and allowing me to eventually rid myself of the $50,000 credit-card debt at 22% APR. That, or I'd lease a car.

And if I lived closer to my place of work and had access to public transport, I would forget about the car, buy an old bicycle and use that to get around. And I'd treat that bicycle like a Dodge Tomahawk V10 Superbike because it was allowing me to kick that 22% APR right where it hurts, and pay off that $50,000 credit-card debt.

A drop in your credit score as a result of your credit-card debt will likely lead to a rise in your automobile insurance. "Many U.S. auto insurance companies use credit-based insurance scores to help determine risk when providing insurance quotes," Allstate $(ALL)$ says. "Unless you live in Massachusetts, Hawaii or California, where the practice has been banned."

Change in lifestyle

When you have $50,000 in credit-card debt, you stop worrying about whether buying a used Lexus feels like a step down from a BMW X7. You stop worrying about what your friends and neighbors think of your new wheels. You also enjoy the nutritious benefits of home-cooked meals and forget about eating out or posting photos on Instagram of pricey vacations.

There are two main methods of paying off debt: the snowball method (paying off the card with the lowest amount on it first) and the avalanche method (paying off the debt with the highest interest rate first). The first is a way to help motivate people to get out of the red, but paying down the highest rate first makes the most sense to me.

You need to be kind to yourself in ways other than buying a nice car. You can be kind to yourself by changing your priorities and taking your foot off the accelerator, figuratively speaking. You can be kind to yourself by caring less about status symbols and surrounding yourself with people who don't spend their time focused on other people's cars or real estate.

Financial hardship

Women tend to suffer financially more than men after divorce, but neither party should allow a period of extremely high stress to impede their decision-making. If you splurge on a fancy car rather than throwing every cent you have at this credit-card debt, you would be buying a nice car for the wrong reason.

This research by sociologist Thomas Leopold, published in the journal Demography, found that men and women experience similar outcomes of subjective economic well-being over the medium term. But women, Leopold concluded, tend to suffer more financial hardship over the long term after their divorce is finalized.

Women's disproportionate losses in household income was also associated with increases in their risk of poverty and single parenting, the study concluded. "Taken together, these findings suggest that men's disproportionate strain of divorce is transient, whereas women's is chronic." Your divorce gave you personal freedom. Now is the time to also pursue financial freedom.

You don't know what's around the corner. One job change or promotion could be enough to boost your income and set you on the road to financial wellness. The economy grows in cycles, and you may - in five or 10 years - find yourself in a position to get a foot on the property ladder, if you haven't already. Your life will only get bigger. You'll feel like a million bucks when you have that divorce debt paid off.

That's the kind of genuine, honest-to-goodness, great-to-be-alive social status that money can buy.

Related: My wife and I paid off my stepdaughter's $415K mortgage in exchange for her house, but it's now worth $310K. Should we sue?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

My husband and I spend more money on our daughter and her family than on my single son. Do we compensate him?

'I'm flabbergasted': My friend wants to borrow $5,800 to save his home from foreclosure. What should I do?

'I have fear of financial insecurity': I'm 58, recently widowed with $1 million saved for retirement. What if the economy tanks?

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-Quentin Fottrell

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May 16, 2025 05:40 ET (09:40 GMT)

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