Car payments vs. Savings

[whattaguy]

I have about $20,000 left on my car payments at 1.9% APR, and I'm going to get about $5000 on selling my old car.

Should I:

1. put it all towards my car and lower my monthly payments

or...

2. put it in my ING savings which is at 2.2%

 

[pulse8]

I would say ING unless you get some kind of benefit from paying your car off early.

 

[sciencewhiz]

how big is your short term savings account?

 

[MercenaryForHire]

Lowering debt > increasing savings IMO.

Any other debts that take precidence over your car?

- M4H

 

[whattaguy]

Originally posted by: MercenaryForHire
Lowering debt > increasing savings IMO.

Any other debts that take precidence over your car?

- M4H

Besides my car, I have my student loan. No CC debt.

 

[Drizzy]

Originally posted by: MercenaryForHire
Lowering debt > increasing savings IMO.

Any other debts that take precidence over your car?

- M4H

Yeah if you have other debts above 1.9% you should pay those off. 1.9 isnt really enough to be too worried about paying off early IMO. But it also depends on what type of a person you are - is that money going to burn a hole in your pocket and be burned up on things you dont really need? If so, get the temptation away and put it towards your car.

 

[Rumpltzer]

With the interest rate at 1.9% and the way interest is paid off on a car loan, it probably doesn't make a lot of sense to pay off the auto loan early.

Here's a calculator that'll show you how much you save by paying off your auto loan at an accelerated rate.

 

[IHateMyJob2004]

Originally posted by: whattaguy
I have about $20,000 left on my car payments at 1.9% APR, and I'm going to get about $5000 on selling my old car.

Should I:

1. put it all towards my car and lower my monthly payments

or...

2. put it in my ING savings which is at 2.2%

Pay off your car unless you decide to put money into a CD or something else. After taxes, your ING savings will be less than 1.9% meaning you will loose more money that way. Put hte $5000 in a 1 year CD or something along those lines. Just make sure you get 3%+ annually on your investment.

 

[MercenaryForHire]

Originally posted by: whattaguy

Originally posted by: MercenaryForHire
Lowering debt > increasing savings IMO.

Any other debts that take precidence over your car?

- M4H

Besides my car, I have my student loan. No CC debt.

If the student loan is no longer in a grace period, turf that sucker ASAP.

If you've still got an appreciable length of time in interest-free, money -> CD or higher-yield investment.

- M4H

 

[TheGameIs21]

Originally posted by: whattaguy
I have about $20,000 left on my car payments at 1.9% APR, and I'm going to get about $5000 on selling my old car.

Should I:

1. put it all towards my car and lower my monthly payments

or...

2. put it in my ING savings which is at 2.2%

3. Put it in your ING savings and pay your car on the 14 day payment schedule.

 

[JetsFanatic]

Originally posted by: pulse8
I would say ING unless you get some kind of benefit from paying your car off early.

me too

 

[spidey07]

as others have already said paying off a car loan early or paying it down isn't necessarily a good idea (depending on how interest is calutated). Its an expense, not an asset.

In order to make this decision you would have to look at your overall budget.

Personally, if it were me I'd put it in savings. With the only outstanding debts of Car and student loans (and goodie tax deductios), having a 3-6 months expenses saved up would be very comforting.

-edit- did this on last car. Sold it for 11K and put it into savings. Now I'm happy that I have 4-5 months expenses in savings.

 

[whattaguy]

This is all great advice...thanks!

 

[RossMAN]

Originally posted by: MercenaryForHire
Lowering debt > increasing savings IMO.

- M4H

I agree with the Canadian-man-whore

 

[amoeba]

if you think you can get higher interest rate return from savings than your credit card interest, put in savings. Dont forget to count it post tax.

If credit card interest is higher, pay off credit card.

in my opinion, credit card interest will most assuredly be higher.

same deal with car payments.

 

[Night201]

I'd put it into my ING. That's just me though.

 

[CPA]

Keep in mind too that paying down your car note will not reduce your monthly payment. It will reduce you term, but the bank will not lower the payment amount. In fact, you will still have to make your next month's full payment.

 

[whattaguy]

Originally posted by: CPA
Keep in mind too that paying down your car note will not reduce your monthly payment. It will reduce you term, but the bank will not lower the payment amount. In fact, you will still have to make your next month's full payment.

Really? If this is the case, it would be pretty pointless to put my chunk of change into the car.

 

[SuperTool]

Put it into foreign or natural resources stocks. The dollar is going nowhere but down with these deficits. Neither 1.9% or 2.2% is worth putting money into, unless you are holding it in a foreign currency. You can get much bigger returns with a good mutual fund.