Joined: 06 Aug 2015
Location: Orange County
Advice on Auto Loan
I'm looking for some advice on my auto loan situation.
I currently pay about $400/month on my auto loan with about $8000 balance (about 20 months remaining). I am able to afford this payment, however, I'd like to lower this payment in order to be more aggressive with some of my other financial goals.
I'm trying to decide if i should either:
1. Continue paying the $400/month until my car is paid off in about 20 months, or
2. Sell my car, which is currently valued between $12,000 and $15,000, pay off remaining auto balance, and use the profit as a down payment on another car resulting in a cheaper auto loan payment, but longer term (i.e. 48 to 60 months).
Let me know your thoughts.
Thu Aug 06, 2015 8:10 am
Cash: $ 381.25
Joined: 09 Feb 2009
IMO if you like the car and can afford it, then work like the dickens to pay it off asap. That will free up $400 a month which you can meet your financial goals. Cars are a money drain on disposable cash. Good luck.
Risk comes from not knowing what you're doing. (Warren Buffet)
Thu Aug 06, 2015 2:45 pm
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
Here's what I do. ( We're retired seniors)
We have a SP500 Index Fund at Vanguard that has returned 11%/yr for about 35 years - so the account has lots of profit.
To buy a new $30,000 car, I have two choices -
1. Sell off about $33,000, use $3000 to pay the taxes, and use $30,000 to buy the car.
2. Leave the $33,000 invested.
Finance the new car 100% (no down payment, I even finance the tax & license) for 60 months at 4% or 5%.
Sell the old car privately for maybe $4000 and add that money to the Fund.
So that makes $37,000 left in the Fund. That Fund, on average, doubles every 7 years (the Rule of 72). So about the time that the car is paid for, the $37k doubles to $74k.
But it depends on your age, your goals, etc. If you are young, it makes sense to get as much money as you can invested early in 401k products, Roth etc. The early investing makes a huge difference in your future wealth in 30 years or so. Or, if you are age t60 and struggling, you may want to down-size buy an affordable car. (BTW, which of the orange counties are you in - LA, NY, FL?)
Thu Aug 06, 2015 3:23 pm
pdgoldinc New Member
Cash: $ 1.25
Joined: 31 Oct 2015
It seems to me that you find your car payment a bit too high for the time being. You may be able to pay it on time but it must be hard for you to make the payments or you would not think about it. If I was you, I would refinance my car loan for a bit longer term. How is your credit? Google it, you are best off with a Credit Union.
Sat Oct 31, 2015 9:04 am
katei25 New Member
Cash: $ 0.60
Joined: 22 Apr 2016
You can reduce this period by taking a shorter loan. For example, with a three-year loan, you already might have built thousands of dollars of equity in the vehicle by the end of the first year.
Another key consideration is the term of a loan, which can significantly affect both your monthly payment and the total cost of your financing. A shorter term means higher monthly payments but less money paid overall. Try to keep the length of the loan as short as you can afford.
Fri Apr 22, 2016 9:32 am
First Choice Member
Cash: $ 4.00
Joined: 26 Jul 2016
Location: Valdosta, GA
As already mentioned in a roundabout way, refinance if needed and get the absolute lowest interest rate you can. If it's cheaper than your other debt, focus on paying that other debt down first or invest in the market if the return is higher. Again, pay off the highest interest rate stuff first or invest if that's at an even higher rate.