Author Topic: Invest or Pay Off Car Loan  (Read 5319 times)

Novicestache

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Invest or Pay Off Car Loan
« on: February 29, 2016, 03:57:46 PM »
We owe 16.1 k on a car loan ($421/month for another 39 months) and have about 16k in cash + some more set aside for emergencies (3 months expenses in cash). 

So a few things here:

- I know MMM does not approve of car loans
- I know MMM does not really approve of emergency funds (cash not at work)
- I also know we will keep the car and the emergency fund for now
- I know if MMM reads this I might get a heart felt lecture

Question:  Given current market conditions, I would appreciate commentary on the following scenarios:

- lump sum the 16k into Vanguard, and if so which funds?

- invest the money in Vanguard some other way

- pay off the car loan which is a 1% loan with about $13 of interest  / month

- something else...

The stock market seems a bit frothy and uncertain right now, which is what is pushing me to pay off the car which frees up $421 / month that would start going into Vanguard via dollar cost averaging...

your thoughts appreciated - thanks...

mtn

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Re: Invest or Pay Off Car Loan
« Reply #1 on: February 29, 2016, 04:00:08 PM »
1% annual interest? Invest it. Or pay half and invest it.

acroy

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Re: Invest or Pay Off Car Loan
« Reply #2 on: February 29, 2016, 04:05:19 PM »
1% annual interest? Invest it.
^^^ this
Shoot, if you can borrow $1Billion at 1%, do it, pop it in 10yr treasuries 1.74% yield and RE with $7.4M/yr income!
They are paying YOU to carry the loan.

NoStacheOhio

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Re: Invest or Pay Off Car Loan
« Reply #3 on: February 29, 2016, 05:24:13 PM »
If you do choose to pay off the car early, make sure you don't have a prepayment penalty.

use2betrix

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Re: Invest or Pay Off Car Loan
« Reply #4 on: February 29, 2016, 06:35:56 PM »
I have a vehicle loan of 36k with 4.9% right now that I have a very hard time justifying paying off. I may soon however the way the market has been.

FYI the vehicle loan is for a truck that tows my trailer that I live full time in, so it's semi justifiable :)

Peter Parker

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Re: Invest or Pay Off Car Loan
« Reply #5 on: February 29, 2016, 08:43:44 PM »
Yep. With a 1% loan, I'd invest it all....and with each car payment I made in the future, it would be a reminder of what a waste of money it is to buy a car....

If and when your car is paid off, divert that payment toward your investment portfolio....You were paying it anyways....

GGNoob

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Re: Invest or Pay Off Car Loan
« Reply #6 on: March 01, 2016, 07:42:22 AM »
Invest it all.

Novicestache

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Re: Invest or Pay Off Car Loan
« Reply #7 on: March 04, 2016, 05:25:00 AM »
Ok thanks - based on the replies here  I am sensing a bias towards investing...are most mustacians in this "rate chasing" group? 

YoungInvestor

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Re: Invest or Pay Off Car Loan
« Reply #8 on: March 04, 2016, 05:57:18 AM »
Ok thanks - based on the replies here  I am sensing a bias towards investing...are most mustacians in this "rate chasing" group?

If eye the car loan was at 3% instead, answers would start to get different, but at 1%, there's no contest, really.

bnoooogers

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Re: Invest or Pay Off Car Loan
« Reply #9 on: March 04, 2016, 05:59:31 AM »
It's just a risk tolerance question. There is a good chance the market outperforms a mere 1% rate. Any particular job security concerns? What if you had an emergency that cost you your job and backup cash (eg medical)? It seems like you could probably just sell the car and buy something cheaper if need be, or liquidate whatever you put that 16k into. And you say 'we' so maybe your spouse is or could be working. So from what you presented, you seem to have an abundance of safety (at least for my taste). But we can only go by what you have presented.
« Last Edit: March 04, 2016, 06:01:50 AM by bnoooogers »

Drew0311

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Re: Invest or Pay Off Car Loan
« Reply #10 on: March 04, 2016, 09:50:00 PM »
I would invest 100% of that in an energy index or a company like Alibaba maybe.