Pay off Auto Loan or Continue Making Payments?
- Thread starter The Critic
- Start date
That's not exactly what the question was about.
I'm not against buying stock. I'm more of an index fund guy myself. Why try to find the stock that beats the index when the index beats 70-80% of the fund offerings out there.
I think the S&P500 has returned close to 14% over the past 10 years, and about 9.5% over the past 50.
And it's usually cheaper than buying stock.
I'm not against buying stock. I'm more of an index fund guy myself. Why try to find the stock that beats the index when the index beats 70-80% of the fund offerings out there.
I think the S&P500 has returned close to 14% over the past 10 years, and about 9.5% over the past 50.
And it's usually cheaper than buying stock.
You're at an effective 4% interest rate as you are paying that loan off with after income tax dollars.
If you can earn 6% plus elsewhere, keep the car loan. You will need to pay some king of tax on your savings/investments, therefore the 6%.
Banks are paying minimal interest.
Stocks have no guarantee on return.
Paying off the loan gives you a guaranteed ROI.
If you can earn 6% plus elsewhere, keep the car loan. You will need to pay some king of tax on your savings/investments, therefore the 6%.
Banks are paying minimal interest.
Stocks have no guarantee on return.
Paying off the loan gives you a guaranteed ROI.
Wish I could pay our Toyota off. Less payments I have to remember the better. There is no way I could come up with the lump sum though.
At that rate, keep paying on it. Save your money for a desperate time.
I would expect that comment on this board where new cars are mostly frowned upon. He should have bought a $5,000.00 Crown Vic.
THIS^^^^^^^^^^^^^
If your rate of return on $18k is better than 2.65% loan interest maybe skip paying it off. What is rate of return on your $18k that is accessible? Also what level of risk?
Personally I would pay it off to simplify my life.
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.
From a pure numbers standpoint, in a vacuum, making payments makes sense. But we don't live in a vacuum.
If you have other higher interest debts, pay them off.
Pay $100 more each month as you reduce principal and therefore interest expense. Same goes for home mortgage.
Personally, with the stock market down, I would look into a long term index fund. Talk to Charles Schwab.
Finally, if $18K in not a huge deal, then why not?
It just depends on your total situation.
If you have other higher interest debts, pay them off.
Pay $100 more each month as you reduce principal and therefore interest expense. Same goes for home mortgage.
Personally, with the stock market down, I would look into a long term index fund. Talk to Charles Schwab.
Finally, if $18K in not a huge deal, then why not?
It just depends on your total situation.
JTK
$100 Site Donor 2025
Was it a 60 month loan you took?
How much do you figure you'll save in interest if you pay it off today?
Any auto loan under 3% is pretty darn good. That's the mark I shoot for with my loans before I'll even consider the loan. I'm not sure they exist today though. Too scared to look. LOL
Zee09
$200 Site Donor 2023
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Neither is marriage if you are a dude...lol. That is the biggest deprecating asset.
It can go really wrong or really right. I've had both experiences!
You did not specify how many years?
In a car loan, the total amount of interest for the length of the loan has been added to the principal divided by the number of months.
Example: $10000 loan at 1% for 6 years means that it is a $10000 + $1000/year times 6 years = $16,000.00 divided by 72 to get the monthly payment.
That is why any car loan rep always tell you "I am with you, I will get you the lowest payment", the longer the term the higher the total but lower monthly.
I am not sure if this is still true, that was what happened the last time I did a car loan in the mid 90s.
That is why, now, I don't get a loan for car anymore.
I save the money and buy when there is enough money to buy the car at the budgeted amount that I save.
This is just a perspective, not a suggestion either way.
At the end, one must make the decision based on the situation.
Pay off means less hassle every month.
In a car loan, the total amount of interest for the length of the loan has been added to the principal divided by the number of months.
Example: $10000 loan at 1% for 6 years means that it is a $10000 + $1000/year times 6 years = $16,000.00 divided by 72 to get the monthly payment.
That is why any car loan rep always tell you "I am with you, I will get you the lowest payment", the longer the term the higher the total but lower monthly.
I am not sure if this is still true, that was what happened the last time I did a car loan in the mid 90s.
That is why, now, I don't get a loan for car anymore.
I save the money and buy when there is enough money to buy the car at the budgeted amount that I save.
This is just a perspective, not a suggestion either way.
At the end, one must make the decision based on the situation.
Pay off means less hassle every month.
When money is cheap, use other peoples money. I could pay off my home loan right now, but what if there is a huge economic downturn and I lose my job? That big chunk of cash just sitting in my bank account is like a really comfy pillow, it lets me sleep easy.
I think you better check your math.
One percent on $10k is $100 and it's not 1% of the beginning balance (unless you are dealing with a less than honest lender. The daily charge is applied to the balance on that day.
So it wouldn't even be $100 the first year.
https://www.calculator.net/amortiza...oanterm=5&cinterestrate=1&printit=0&x=69&y=26
Monthly Pay: $170.94
| Total of 60 Loan Payments | $10,256.25 |
| Total Interest | $256.25 |
Zee09
$200 Site Donor 2023
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- 21,305
Me too.
Ford did me great on a real 60 month zero percent deal...flipped it in covid time and did great.
Now VW had a zero percent scam that forced you to pay full MSRP to get it...nope... I got $6500 off and did my own financing.
Free money is good if its really that way and I like to keep my money close...lol
