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Car Payment vs. Savings

Discussion in 'Money & Finance Forum' started by Savio, Oct 16, 2007.

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  1. Oct 16, 2007 at 12:14 AM #1
    Savio

    Savio Freelance Pimp

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    Long story short...

    Car Loan is sitting at 4.19%

    Savings is earning 4.3%

    I have $8,000 on the loan. I have the money to pay it off but I'm earning more than the interest on the loan. It would be nice not to have a payment on it too.

    What would you do?
     
  2. Oct 16, 2007 at 12:23 AM #2
    Guest

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    I'd say save the cash and make the payment.

    but I don't know much...I bought a loaded Jeep and now I'm sitting 5K upside down and the Jeep breaks all the damn time.
     
  3. Oct 16, 2007 at 7:38 AM #3
    Southern_Yankee

    Southern_Yankee Full Access Member

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    save a stamp :scholar:
     
  4. Oct 16, 2007 at 7:57 AM #4
    VA49er

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    Pay of the car. You can't deduct car interest, unless of course it's on a home equity line. Oh yea, debt sucks.
     
  5. Oct 16, 2007 at 9:32 AM #5
    Hard Harry

    Hard Harry Sometimes Functional INTP

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    HELOC Savio. Deduct that shit & watch your cost of funds head towards zero.
     
  6. Oct 16, 2007 at 9:33 AM #6
    VA49er

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    Is 0.11% enough to even worry about this?
     
  7. Oct 16, 2007 at 9:33 AM #7
    slydevl

    slydevl Asshole for the People!

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    A HELOC right now would cost around double what he is paying. I find it hard to believe just writing off the interest would make that worthwhile.
     
  8. Oct 16, 2007 at 9:37 AM #8
    Hard Harry

    Hard Harry Sometimes Functional INTP

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    Good point. :blauwoog:
     
  9. Oct 16, 2007 at 9:43 AM #9
    meatpile

    meatpile 7-9

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    Since you pay taxes on the savings earnings, that's costing you a small amount.

    Whether you should pay it off epends on your cashflow, and how much you'd have left over after you pay off the debt.

    Sometimes paying a little in interest, as you are, to have cash on hand is a good thing. If you have plenty extra after you pay the debt, pay the debt. If not, keep it, and pay a little to keep that cash on hand in case something unforeseen happens - job loss, injury, some unseen large expense.

    I would not keep the debt if after you pay it off you still have a nice pile of cash. If you have good cashflow above your expenses, and can build that cash back up quickly, you could do that BEFORE you pay it off, just to be safe. That's cheap insurance.
     
  10. Oct 16, 2007 at 9:56 AM #10
    Thelt

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    Speaking as someone who is upside down on both his cars I would pay it off. Cars are evil things that tempt you until you fall for the seduction and then end up with the financial equivalent of an STD.
     
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