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Started By
Message
Paying Off A Vehicle
Posted on 6/27/11 at 7:47 pm
Posted on 6/27/11 at 7:47 pm
I am looking for advice or the advatanges/disadvatanges of paying off a vehicle.
I have the cash to pay off the remaining balance, 15k, but I am hesistant to tie up cash in something I know will only depreciate.
I don't have any credit card or student loan debt, and paying off this amount isn't going to drain my savings. I also plan on keeping this vehicle for at least the next 2 years, possibly longer.
The vehicle is an '08 Toyota Tacoma with 23K miles on it. My APR is 5.75%.
I will hang up and listen now.
I have the cash to pay off the remaining balance, 15k, but I am hesistant to tie up cash in something I know will only depreciate.
I don't have any credit card or student loan debt, and paying off this amount isn't going to drain my savings. I also plan on keeping this vehicle for at least the next 2 years, possibly longer.
The vehicle is an '08 Toyota Tacoma with 23K miles on it. My APR is 5.75%.
I will hang up and listen now.
This post was edited on 6/27/11 at 8:06 pm
8
Posted on 6/27/11 at 7:56 pm to The People
With an APR that high, pay it off & Pay your car note back into your savings. Do you have any reason tobelieve you'll need your savings any time soon?
Posted on 6/27/11 at 7:58 pm to LSUGUMBO
quote:
Do you have any reason tobelieve you'll need your savings any time soon?
No, not really. I imagine I will be in the market for a house within the next 2 years, but I should have time to save that much again.
Posted on 6/27/11 at 8:10 pm to The People
quote:
My APR is 5.75%.
If you can afford it, write a check tomorrow.
Posted on 6/27/11 at 8:13 pm to The People
quote:
I also plan on keeping this vehicle for at least the next 2 years, possibly longer.
In the same post you dont want to sink 15k into something that depreciates...yet you are going to keep it only another 2 years and likely start this process all over again....
Posted on 6/27/11 at 8:14 pm to The People
quote:
I have the cash to pay off the remaining balance, 15k, but I am hesistant to tie up cash in something I know will only depreciate.
You need to know that this logic doesn't make any sense. You will be putting cash into that depreciating good anyway, whether it takes place tomorrow or over the next 3 years.
Can you get a better adjusted risk rate in the next two-three years that is higher than 5.75%? The answer is probably no. Just pay off the car and then build up your cash reserves again.
Posted on 6/27/11 at 8:17 pm to I Love Bama
Do you have a mortgage? If so and the rate is lower than your car APR, then you could pay off the car with a HELOC and then invest your cash to maker a higher rate of return than your mortgage rate. You also get the mortgage deduction in addition so this is extra savings.
Do you have any kind of emergency fund left if you pay cash for the car? If you do, pay it off tomorrow.
Do you have any kind of emergency fund left if you pay cash for the car? If you do, pay it off tomorrow.
This post was edited on 6/27/11 at 8:21 pm
Posted on 6/27/11 at 8:19 pm to The People
You have a guaranteed 5.75% rate of return on after-tax money. That isn't bad at all in today's low interest rate environment, and I'd seriously consider paying it off. If you were in the top tax bracket a tax-sheltered alternative might be better, but if you are a cop I'm guessing this doesn't apply.
BTW, it really doesn't matter what the note is for, other than the fact that if you were to sell the car the note would immediately become due anyway. It could be a personal loan, a mortgage, whatever, the calculation is the same.
BTW, it really doesn't matter what the note is for, other than the fact that if you were to sell the car the note would immediately become due anyway. It could be a personal loan, a mortgage, whatever, the calculation is the same.
Posted on 6/27/11 at 8:24 pm to lynxcat
quote:
Do you have any kind of emergency fund leftif you part cash for the car? If you do, pay it off tomorrow.
Yea I should be fine. When I financed it, I set up a recurring payment from my checking account and really never looked back into my account. I have always had a car note since I started driving so paying it each month never really bothered me.
I think I finally realized that I make or have saved enough money to pay off a vehicle and was curious if for any reason it would be a bad idea.
I am sure the answers to this problem are probably pretty obvious, but I do appreciate the input so far.
This post was edited on 6/27/11 at 8:27 pm
Posted on 6/27/11 at 8:42 pm to The People
If you want to build your wealth, what you can do is pay the loan off, build up your cash again, and then whenever you are sick of your car, sell it and then use your cash reserves to buy the next car without financing.
This post was edited on 6/27/11 at 8:43 pm
Posted on 6/27/11 at 8:44 pm to The People
quote:
I have the cash to pay off the remaining balance, 15k, but I am hesistant to tie up cash in something I know will only depreciate. I don't have any credit card or student loan debt, and paying off this amount isn't going to drain my savings. I also plan on keeping this vehicle for at least the next 2 years, possibly longer.
Same situation but the balance is 2k and I plan to keep it a minimum of another 4.5yrs. I have an 8yr rule on cars.
Posted on 6/28/11 at 11:16 am to LSUtoOmaha
quote:
You need to know that this logic doesn't make any sense. You will be putting cash into that depreciating good anyway, whether it takes place tomorrow or over the next 3 years.
Can you get a better adjusted risk rate in the next two-three years that is higher than 5.75%? The answer is probably no. Just pay off the car and then build up your cash reserves again.
Posted on 6/28/11 at 12:33 pm to The People
quote:
The vehicle is an '08 Toyota Tacoma with 23K miles on it. My APR is 5.75%.
Many credit unions have car loans available to finance your year/mileage vehicle @ 2.5%. I would refi it, and keep the cash for something better down the road be it a larger down payment on a house, investment, etc.
Posted on 6/29/11 at 9:22 am to The People
It may be just me, but if you have the cash to pay it off now, why would you give the bank an extra 5.75%? Like someone posted earlier, you said you didnt want to sink 15K into a depreciating asset. Well if you pay off the vehicle according to the terms of the loan, you are sinking 18-20K into the same asset.
I am in the cash is king crowd. Why in the world would you pay an extra % just to stretch out payments when you already have the cash on hand? Especially with a vehicle, where there is little incentive to pay interest.
I am in the cash is king crowd. Why in the world would you pay an extra % just to stretch out payments when you already have the cash on hand? Especially with a vehicle, where there is little incentive to pay interest.
Posted on 6/29/11 at 9:31 am to slinger1317
quote:
Why in the world would you pay an extra % just to stretch out payments when you already have the cash on hand? Especially with a vehicle, where there is little incentive to pay interest.
NVM, covered
This post was edited on 6/29/11 at 9:32 am
Posted on 6/29/11 at 3:18 pm to slinger1317
quote:
It may be just me, but if you have the cash to pay it off now, why would you give the bank an extra 5.75%? Like someone posted earlier, you said you didnt want to sink 15K into a depreciating asset. Well if you pay off the vehicle according to the terms of the loan, you are sinking 18-20K into the same asset.
Great advice, right on track with all the other input I have gotten so far.
Cutting the check to pay it off as we speak.
Thanks again.
Posted on 6/29/11 at 3:41 pm to LSUtoOmaha
quote:
If you want to build your wealth, what you can do is pay the loan off, build up your cash again, and then whenever you are sick of your car, sell it and then use your cash reserves to buy the next car without financing.
Yeah with that much available cash on hand I really don't see the need to finance a vehicle at over 5%
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