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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Justaerin on March 21, 2013, 01:31:41 PM

Title: Drop savings into auto payment that I plan on selling?
Post by: Justaerin on March 21, 2013, 01:31:41 PM
I currently have a motorcycle I'm making payments on, $204/mo.  I owe $7,872 @ 4.6%.  It's worth $8k via NADA.  I have no other vehicles, but if I can sell this thing I'd like to pay cash for a used Honda or Toyota - something frugal.  The bike does serve several roles as I can attach panniers, the weather here is rideable year round so it has quite a bit of utility.  I'm not in any need to get rid of it and into a car other than simply the debt of having it.

I currently have no debts otherwise, $7800 in a retirement account, and $3500 in savings.  I just recently made a hardcore effort to pay off several CCs, consequently the low savings, which I'm aggressively trying to build - hence wanting to be rid of the auto payment.  The savings right now is a general emergency/vehicle fund.  I have a $5,000 LoC I can tap in emergencies, as well as plenty of available credit on CCs (that I'd like to never use again, if possible).

So the question is, do I throw all available cash at paying off the motorcycle (which has been up for sale for a month with no interest), or keep building my savings with that spare income - eventually passing the point where I can pay off the bike and then just do it then?  The problem with this of course is that 4.6% over my head.  But if I drop all available cash into it I can get rid of that payment sooner and replenish my savings decently, but I'll have no cash to purchase a good vehicle that shows up. 

As you can see, lots of possibilities, I'm sure plenty I haven't considered, like even buying a cheap car now and having them BOTH (gasp) until I can sell it.  Just looking for some guidance or general advice/experience from you kind souls to help me through.
Title: Re: Drop savings into auto payment that I plan on selling?
Post by: mlipps on March 21, 2013, 07:04:43 PM
I'd pay it off, then take out a PenFed loan at 1.49% when a car you want comes along. Then, of course, RUN AROUND LIKE CRAZY LIKE YOUR HAIR IS ON FIRE AND PAY OFF THE CAR LOAN. But you must have known that part was coming!
Title: Re: Drop savings into auto payment that I plan on selling?
Post by: Justaerin on March 22, 2013, 10:22:14 AM
I really appreciate the input, and the loan would certainly be small due to the fact that I'll choose a frugal(ish) car, at least one with longevity, but I have vowed no more financing of items.  I'd rather not bend that rule so fresh out of CC debt!  But yeah I think it's missing out on the opportunity money that is the issue.  I'd hate for the perfect vehicle to come by at a ridiculous price with me having no cash with which to make the purchase.  I am certainly a slave to the cash at this point, which is better than being a slave to credit, but I just have that needy rush to get out of that auto payment and into a cheap car to be COMPLETELY debt free, so I think that is clouding my decision making!