Pay off Auto Loan or Continue Making Payments?
- Thread starter The Critic
- Start date
Putting income risk and other personal finance limits aside, it is as simple as putting the money where it will earn the most as soon as possible. Unless you can earn > 2.65% on the cash that would pay this truck off, it should be paid off. Again, personal finance issues aside.
Lotsa good points... In the big scheme of things, $18K is not a lot. However, over the long term, it could double or even much more.
I believe in balanced use of money.
I hate loans, but in effect you are gaining an asset using other people's money. So credit is neither bad or good; it is a tool.
Make your money work for you at all times; good markets or bad.
Long term investment in a nice index fund will be worth far more than your Ram in 10 years.
I believe in balanced use of money.
I hate loans, but in effect you are gaining an asset using other people's money. So credit is neither bad or good; it is a tool.
Make your money work for you at all times; good markets or bad.
Long term investment in a nice index fund will be worth far more than your Ram in 10 years.
Nothing. It is money that I keep on hand for day-to-day expenses.
48 months. It's probably a 3-figure savings.
The problem is..do you have the discipline to take that $600 a month, EVERY MONTH, on the payment due date, and invest/save it just as you would if you were paying off a RAM that you may or have not needed. Probably not. $600 a month can always find a leak in a budget.
For tax reasons, I generally do not invest outside of retirement accounts.
Dave Ramsey, The Total Money Makeover. Pay it off and then every month pay the same payment to yourself in a good savings account or other resource. You're used to making that payment so you should be able to do it no problem and you will be over $7k per year ahead.
I do get it. If you have it, spend it. A $600 car payment would be a bit much for me. To each his own.
Given you've made ~5 more payments at a minimum since this tread was started, I'm assuming you owe ~$15500 or so on the truck at this point. Market value is probably ~$40K. Either way you go, you're doing pretty darn good and will be for the remainder of the loan and beyond if you ride it out.
I refi my car from cash to a credit union loan for 2 years at 1.5% back in 2015 or so. The bank lady ask me what was I doing with the money and I told her the 1.5% is cheaper than my mortgage at 3% so I am just taking it to pay off my mortgage earlier, and I declined the gap insurance because it was pointless for me anyways.
At 2.65% I'd just keep it and invest more in "something else" that has a higher yield, whether it is my 401k, pay off my mortgage, child education fund, whatever you choose if you have some extra lying around, just do it instead of blowing it on entertainment.
At 2.65% I'd just keep it and invest more in "something else" that has a higher yield, whether it is my 401k, pay off my mortgage, child education fund, whatever you choose if you have some extra lying around, just do it instead of blowing it on entertainment.
I’d suggest working with a financial planner on that one. If you plan on retiring early your going to face possible issues taking money from your retirement accounts.
Just my $0.02
Good points all. Anything is a better investment than a depreciating vehicle. Pay it off if you possibly can, and invest that $600.00 @ month in a good retirement account, or annuity.
When you get into your 60's I promise you, you'll be very glad you did. And by that time you will have forgotten all about that old Ram.... Which will most likely be in the boneyard by then.
I already have a good system in place for retirement investments, so let’s leave that out of this equation.
If you actually have the cash in hand to pay off the loan, then I would recommend that you invest it in US Treasury series I savings bonds. No risk of loss and a 9.62% interest rate. It's one of the better investing deals around right now. While the money is inaccessible for the first 12 months, it's as good as cash after that. If inflation declines in the coming months and the bond interest rate resets to be lower than the cost of the loan, then just cash it out and pay off the loan at that time.
I just bought a new car and financed 100% of the purchase price so that I could do exactly this. Paying 2.89% interest to the bank while collecting 9.62% interest from the federal government gives me a spread of 6.73% pre-tax, which is a far better return than if I were to pay off the loan early and just save the 2.89% car loan interest.
I just bought a new car and financed 100% of the purchase price so that I could do exactly this. Paying 2.89% interest to the bank while collecting 9.62% interest from the federal government gives me a spread of 6.73% pre-tax, which is a far better return than if I were to pay off the loan early and just save the 2.89% car loan interest.
I would say it depends what the money you have to pay it off is currently doing.
If it’s part of your emergency savings, I would not touch it.
If it’s invested and you would have to cash it out, I would not touch it.
If it’s just an excess cash in the bank account, then I would consider paying it off, however an investment of that money would probably be a better idea.
If it’s part of your emergency savings, I would not touch it.
If it’s invested and you would have to cash it out, I would not touch it.
If it’s just an excess cash in the bank account, then I would consider paying it off, however an investment of that money would probably be a better idea.
We had a loan for vehicle that we could have paid off a year ago and sat for no good reason.
We paid off just last 1.5 yr of 5 got the title and our only debt in the world and you wake up different not owing anything.
We paid off just last 1.5 yr of 5 got the title and our only debt in the world and you wake up different not owing anything.
I know vehicles are being considered a “depreciating asset” so to say. But the market is actually weird and the truck he bought when he bought it he can’t now for that same price.
Also you need a vehicle to be able to make a living and $ to pay for everything else. So I consider it a tool. Sure can do for cheaper but that more relative to other situations
Keep on keeping on
Also you need a vehicle to be able to make a living and $ to pay for everything else. So I consider it a tool. Sure can do for cheaper but that more relative to other situations
Keep on keeping on
The money is already spent, whether paying it off early or not is really just a math equation.
That $600 a month in the future for the rest of the car loan is the equivalent of the total you have RIGHT NOW for the $18k today. You can invest either way and nobody would know which one has higher risk and which one has higher reward. The only certain thing is 2.65% on the car loan right now, unless you are putting 18k in a fixed return investment with a guarantee you have to speculate what that return and risk would be.
I had 2 car loans. Still have 1. The current one has 0% and is due to be paid off in 9/23. The one I just paid off was .9% and was due to be paid off in 8/25. I was putting double payments down plus extra. So my $362/mo became $724+. What I plan to do now is take $362 and put towards my mortgage and the other $362 and extra and put in savings. I was paying more in interest than I was making on my savings and I just wanted to get down to 1 loan. So now if anything happens like loosing my job I have one car paid off the the other almost. Though, I didn't pay the loan off with one lump sum which I could have, I did pay off early without hurting my account while saving some money in interest. Just what I did. Doesn't mean it will work for everyone nor that it is the correct decision for anyone but myself. I could pay off the other loan too but with 0% I see no reason. So now, I can cut my mortgage time, save money on interest while saving some extra money too so I can save for a new house.
I did the same for my student loans. Anytime I got my tax refund I would but a few thousand up to maybe 6k toward it. When I got tuition reimbursement I put it directly down on the loans. When I paid off one of the individual loans and my monthly payment dropped I made extra payments to bring it back to what I was originally paying to cut the amount of interest I was going to be paying.
I did the same for my student loans. Anytime I got my tax refund I would but a few thousand up to maybe 6k toward it. When I got tuition reimbursement I put it directly down on the loans. When I paid off one of the individual loans and my monthly payment dropped I made extra payments to bring it back to what I was originally paying to cut the amount of interest I was going to be paying.
