Author Topic: Accelerating Truck payments?  (Read 6282 times)

skandrae

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Accelerating Truck payments?
« on: December 12, 2012, 03:16:25 PM »
My fellow Mustachians, I come before you today with a question. Iím just trying to figure out how to word it so it doesnít sound like Iím asking for a pony ^_^

In 2010, I bought a small pickup truck, which was financed for 60 months. (Iím not interested in hearing why that was a bad, unMustachian thing to do Ė it was a different time, and I was a different woman then.)

My current situation is this Ė I have 28 more payments of roughly $500/month, which would put my payoff date as April 2015. I am currently saving $400/month in my TFSA, $300/month in my personal RSP, and 7.5% of my pay in my group RSP through work (with a 100% match by my employer).

My question is Ė does it make sense for me to keep on as I am now, saving while paying the loan? Or does it make sense to drop the savings in both my TFSA and RSP down to $100/month each (to keep the momentum going), and throw the extra $500/month at the truck loan? I estimate that if do the latter, I would have the truck paid off in March 2014. I would still have contribution room available in both the TFSA and RSP for the 15 months that I decreased my contributions.

Iím interested in your thoughts of which of the two choices would be better.

gdborton

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Re: Accelerating Truck payments?
« Reply #1 on: December 12, 2012, 03:47:01 PM »
These sort of questions come up all the time.  The answer is simple, if it is low interest (below 5% or so) then pay the minimum and invest the money.  If you feel like ignoring the advice and going by what will feel nice (having a payed off vehicle feels nice), then pay it off.

ShavenLlama

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Re: Accelerating Truck payments?
« Reply #2 on: December 12, 2012, 03:49:04 PM »
You didn't say what your loan % is, so I can't give you a mathmatical answer. But I will say that not having a car payment is awesome, and you should get rid of it ASAP. Then you'll have the $500/month to save a lot sooner.

Go on bankrate.com and check the amortization chart on your loan so you can see just how much cash you are saving in interest. You spent more in interest in the beginning of your loan than you will save by paying off early, but you will still save a significant amount.

Of course, the hardcore among us will tell you to sell your truck and buy a cheaper used car with better fuel economy in cash. But that's not what you asked. :)

skandrae

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Re: Accelerating Truck payments?
« Reply #3 on: December 12, 2012, 03:51:03 PM »
Sorry, the loan rate is 6.9%, I think. (As I said, it was a different time for me)

skandrae

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Re: Accelerating Truck payments?
« Reply #4 on: December 12, 2012, 03:57:05 PM »
Of course, the hardcore among us will tell you to sell your truck and buy a cheaper used car with better fuel economy in cash. But that's not what you asked. :)

And that's why I phrased it the way I did ^_^

gdborton

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Re: Accelerating Truck payments?
« Reply #5 on: December 12, 2012, 03:57:20 PM »
Then if you don't want to sell (who buys a $30k vehicle anyway?), pay that sucker off, 7% guaranteed return is a good thing.

skandrae

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Re: Accelerating Truck payments?
« Reply #6 on: December 12, 2012, 03:59:23 PM »
Then if you don't want to sell (who buys a $30k vehicle anyway?), pay that sucker off, 7% guaranteed return is a good thing.

Someone who didn't know any better at the time. Who lived a long way from civilization and required a vehicle pretty darn quickly.

skandrae

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Re: Accelerating Truck payments?
« Reply #7 on: December 12, 2012, 04:08:55 PM »
Actually, just the process of writing this down and playing with the numbers on my spreadsheet made the answer pretty clear. THanks for answering, gdborton and ShavenLlama :)

PJ

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Re: Accelerating Truck payments?
« Reply #8 on: December 12, 2012, 09:59:09 PM »
My fellow Mustachians, I come before you today with a question. Iím just trying to figure out how to word it so it doesnít sound like Iím asking for a pony ^_^
I'm guessing that at some future time, there will be a very confused person who searches the forum for "truck payments" and pulls up this thread, with its reference to asking for a pony. 

Note to that future reader ... you had to be there.  :-)

NWstubble

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Re: Accelerating Truck payments?
« Reply #9 on: December 12, 2012, 10:18:53 PM »
My wife and I just had a somewhat similar conversation. We have been excelerating the car payoff, but with an interest rate of 2.9% were putting most our money elsewhere for bigger returns. However, we just did some calculating and realized that by squeezing a little extra out of the next couple of months budget and tapping into our cash reserve we could actually pay off the car. Made sense when we realized our cash reserve was making less than 2.9% and with the bonus of being debt free (except mortgage) it was a no brainier. Anyway, sorry to hijack, I support paying it down faster since it has such a high interest rate.

Karl

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Re: Accelerating Truck payments?
« Reply #10 on: December 13, 2012, 05:30:11 AM »
Well...wouldn't a pony have been cheaper?  :

frugal_engineer

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Re: Accelerating Truck payments?
« Reply #11 on: December 13, 2012, 06:33:56 AM »
Well...wouldn't a pony have been cheaper?  :

The Pony would have lower fuel mileage.

skandrae

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Re: Accelerating Truck payments?
« Reply #12 on: December 13, 2012, 09:29:13 AM »
The pony would be more vulnerable to attacks by wolves/bears, and you can't load a pony up with as many groceries. Also,m a trip to town is 8 hours of driving (round-trip) - I don't know how long it would take by pony. ^_^

The_Dude

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Re: Accelerating Truck payments?
« Reply #13 on: December 13, 2012, 10:15:02 AM »
Just make sure you get credit for the accelerated payments and end up paying less interest.

A former girlfriend "accelerated" payments on her car and paid off the 5 year loan in less than 2 years.  She ended up paying the exact same interest as if she paid it off over the 5 years because each time she mailed in an extra payment it was with the payments stub that came with her loan (this was a while back) and they just extended her next payment date.  I tried to argue for her to look into it but she was just "happy to have the car paid off" despite getting royally hosed on interest expense.

skandrae

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Re: Accelerating Truck payments?
« Reply #14 on: December 13, 2012, 10:56:14 AM »
Just make sure you get credit for the accelerated payments and end up paying less interest.

Yeah, I made sure about that with the credit agency - I have to let them know that the additional payments are to go on the principle directly.

PJ

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Re: Accelerating Truck payments?
« Reply #15 on: December 13, 2012, 12:08:37 PM »
The pony would be more vulnerable to attacks by wolves/bears, and you can't load a pony up with as many groceries. Also,m a trip to town is 8 hours of driving (round-trip) - I don't know how long it would take by pony. ^_^
I wonder if you could adapt a bike trailer to be pulled by a pony???  And if you're going on a two day trip to the grocery store, please make sure that you pack a cooler so you don't have to eat out along the way. 

Actually ... hmm.  I see a problem here.  Ponies don't have cigarette lighters to plug your cooler into. 

ShavenLlama

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Re: Accelerating Truck payments?
« Reply #16 on: December 13, 2012, 12:45:52 PM »
Do you need a cooler in the Yukon?

skandrae

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Re: Accelerating Truck payments?
« Reply #17 on: December 13, 2012, 03:44:41 PM »
Do you need a cooler in the Yukon?

At the moment? No. Last year I turned my back deck into a chest freezer. :)  But for hauling groceries in the summer? Definitely. If I'm stocking up on frozen vegetables, I hate having them partially thaw and then refreeze in a giant block.

I wonder if you could adapt a bike trailer to be pulled by a pony???  And if you're going on a two day trip to the grocery store, please make sure that you pack a cooler so you don't have to eat out along the way. 

Actually ... hmm.  I see a problem here.  Ponies don't have cigarette lighters to plug your cooler into. 

I think a bike trailer pulled by a pony is a wagon :) But, yeah, no power source for necessities.
« Last Edit: December 13, 2012, 03:52:04 PM by skandrae »

PJ

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Re: Accelerating Truck payments?
« Reply #18 on: December 13, 2012, 04:27:22 PM »
I wonder if you could adapt a bike trailer to be pulled by a pony???  And if you're going on a two day trip to the grocery store, please make sure that you pack a cooler so you don't have to eat out along the way. 

Actually ... hmm.  I see a problem here.  Ponies don't have cigarette lighters to plug your cooler into. 

I think a bike trailer pulled by a pony is a wagon :) But, yeah, no power source for necessities.
Although there are some biodiesel possibilities ;-)

frugal_engineer

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Re: Accelerating Truck payments?
« Reply #19 on: December 15, 2012, 02:51:20 PM »
Do you need a cooler in the Yukon?

You bought 500 lbs of food, but you can only carry 200 lbs back to the Pony.