Pay off Auto Loan or Continue Making Payments?

[Owen Lucas]

Roslyn savings bank.

6.78% theres plenty out there

How dare they, Janet Yellen will be coming for them!

I agree, keep paying, free money with current inflation.

Take the $18k and see if your advisor recommends some speculative plays or buy 6 shares of Amazon.

 

[2010Civic]

I'd pay it off. You'll save yourself ~$700 in interest if my backwards math is right.

 

[PimTac]

Roslyn savings bank.

6.78% theres plenty out there

If it sounds too good to be true,,,,,,,

 

[Malo83]

Paid off my house and car early, concentrating on my credit card debt.

 

[tnt_motorsports]

The Ram in my signature is currently financed at 2.65% with $600/mo payments.

I owe $18K on the truck.

I can pay off the balance without any issues, but with the current inflation, it seems like making payments at a 2.65% interest rate is the better deal.

Thoughts?

FWIW, I think it comes down to your cashflow and the need for the $18k. I recently paid my wife's van off because our youngest starts college in August. My rational was the 2.25% interest rate, although cheap was hindering my cash flow. I now have that money to direct towards college expenses. Yes I could have used the savings money for college but I didn't want to have the car payment. Now the only payment is the house, and that will be gone soon enough.

just my $0.02

 

[BLND1]

Paid off my house and car early, concentrating on my credit card debt.

Call me crazy - I would have gone the opposite direction.

 

[PimTac]

Since you hinted that this money is available to pay off the loan I would suggest that you hang onto it and put it into a safe investment. You will not make much on this. If you don’t have a emergency fund then this fits the bill. If you are set as far as a emergency fund then this could be part or all used as a down payment on your next vehicle.

 

[Schandyman]

If it sounds too good to be true,,,,,,,

I’ve had NYCB stock for years pays a great dividend

 

[PimTac]

I’ve had NYCB stock for years pays a great dividend

That’s good, considering the share price is down quite a bit this past year.

 

[Duffyjr]

Our top priority over the years was to pay off the house, we added what ever we had to spare that month. In the beginnng it was only $25ish a month but towards the end we were making almost double payments. Paid a 30 year loan off in 22 years.

I don't like interest so if it wasn't going to be a hardship to pay it off I would.

 

[Ursatdx]

Roslyn savings bank.

6.78% theres plenty out there

Highly doubt it.
Please provide a real link that shows 6.78%.

 

[Schandyman]

 

[CharlesInCharge]

Revisiting this, assuming the cash is available to pay off the note but the OP is trying to determine the BEST place to put the cash...

Car loan ~3%. So you have to "beat" the guaranteed 3% with something else.

Current reported inflation, ~9%. So sitting on cash, you lose 9%.
Actual observed inflation since 2020 = 30% to 50%. Sitting on cash you really lose about 30%+.
Banks pay about 1%, maybe more for long term CDs.
Even a 10% return in the market is LOSING (or at best a tie, but with high risk) against the current inflation.
Interest rates are going higher.

So if you take cash, pay off the 3%, hedge against the 9% reported inflation, that's a 12% ROI. Not bad. To get that in the market you have to take aggressive risks...

So for these reasons, it might be smarter to take the guaranteed 3% and fight inflation at the same time b/c your $18k will LOSE money sitting in cash.

But - there are other assets that can fight inflation, such as hard goods or land.

 

[JHZR2]

Not a fan of holding debts like this, but if you feel the value of money is dropping, and you’ll be adding a zero onto the denomination of your money soon, then it would make sense to pay it with cheaper money.

The issue is that if your actual wages aren’t rising fast, and the market isn’t correcting sufficiently, and you’re not really earning anything on your cash, then using it may be a better bet.

 

[dareo]

Equities are pretty beaten down this year. I would Invest and pay it off later. The only scenario i would pay it off is if the payment puts any financial stress on you on a monthy basis. When stocks are hitting new highs would be the time to consider cashing out to clear low rate debt. There is too much upside to miss out on. Just my opinion, not financial advice. My local CU let me have .99% auto refinance, you better believe i did it instead of paying it off!

 

[joekingcorvette]

I would pay it off and never borrow money on a vehicle again. I do not like car, truck or any payments and have not had any for over 20 years. The stock market will always be a gamble however in the long run it will pay off. You just have to have money set aside for a couple slow years or more with negative or no ROI. Let us know what you decide OP.

 

[xBa380]

You are much better off having a loan at a low APR for 60 months and investing that spare money you would have used to pay it off, instead. Debt isn't always bad unless you let it be...

Even with a $700 car payment myself, I am maxing out my 401K each year, among other things (emergency fund fully loaded) and saving money elsewhere that people tend to waste. It all depends on each situation. No one size fits all, here.

You have to think about what is best with the money available to you and do what gives your more long term. If you have a $600 car payment while having no money in the bank and just dumping 6% into a 401K, yeah, not the best idea. Again, it depends on each person and their situation.

 

[Bud]

Just do what makes you sleep well at night.

 

[64bawagon]

I have listened to Dave Ramsey a bit and his advice on vehicles is pay cash for what you afford and move up. Also do not have half your salary worth of assets tied into things with wheels and motors because they depreciate.

I understand the pay cash theory. My point was that he still believes you can get a semi reliable car for $1000. I drove a lot of beaters in the winters when I was younger, back in the 70's and 80's you could get a halfway decent car for $1000 but that was 40 yrs ago. I believe he may be a little out of touch with the current vehicle market.
I see plenty of people that leased a vehicle for a decent monthly cost and have the advantage of driving a modern, reliable, warrantied vehicle with advanced safety features for the same monthly outlay that other spend trying to keep a beater on the road (tires, batteries, repairs etc)
Driving a beater only works if you have the time, skills and resources to keep up with it. I got my Cruze for a decent price but I have also done a bunch of work to it. New tires, TPMS sensors, engine fan repair, trans service, coolant service, brake fluid replacement etc, all the things that are needed to keep an older car reliable in my opinion.

 

[javacontour]

I understand the pay cash theory. My point was that he still believes you can get a semi reliable car for $1000. I drove a lot of beaters in the winters when I was younger, back in the 70's and 80's you could get a halfway decent car for $1000 but that was 40 yrs ago. I believe he may be a little out of touch with the current vehicle market.
I see plenty of people that leased a vehicle for a decent monthly cost and have the advantage of driving a modern, reliable, warrantied vehicle with advanced safety features for the same monthly outlay that other spend trying to keep a beater on the road (tires, batteries, repairs etc)
Driving a beater only works if you have the time, skills and resources to keep up with it. I got my Cruze for a decent price but I have also done a bunch of work to it. New tires, TPMS sensors, engine fan repair, trans service, coolant service, brake fluid replacement etc, all the things that are needed to keep an older car reliable in my opinion.

The $1000 car of 1980 is a $3500 car today give or take.