soonermomma Posted January 19, 2012 Share Posted January 19, 2012 We had our taxes done today and will be getting back a pretty nice chunk. Now we have a dilemma. We have a little less than two years left to pay on our vehicle. Our payment is $230 a month, which would be nice to be able to put in savings. The payoff will NOT be less than if we just paid it out over the next two years. The first option we are considering is just paying the vehicle off totally. Our refund is enough that we could pay off our vehicle, but that would only leave us about $800 to put in savings. The 2nd option we are considering is just paying a lump sum, equal to one year of payments and then continuing to make our normal payment, which would pay off the vehicle by the end of the year. That would still allow us to pad our savings a little. The 3rd option we considered is to just make our vehicle payments as usual, and use some of the money to make a few small home improvements that we have been wanting to make for a while now. Doing this we could pad our savings about the same as option 2. We have no other debt besides our house, but don't really have much in accessible savings. We will be getting a $2000 payment in September that I plan on putting most of in savings as well. So, if this was your choice to make, what would you choose and why?? Quote Link to comment Share on other sites More sharing options...
Alte Veste Academy Posted January 19, 2012 Share Posted January 19, 2012 We had our taxes done today and will be getting back a pretty nice chunk. Now we have a dilemma. We have a little less than two years left to pay on our vehicle. Our payment is $230 a month, which would be nice to be able to put in savings. The payoff will NOT be less than if we just paid it out over the next two years. The first option we are considering is just paying the vehicle off totally. Our refund is enough that we could pay off our vehicle, but that would only leave us about $800 to put in savings. The 2nd option we are considering is just paying a lump sum, equal to one year of payments and then continuing to make our normal payment, which would pay off the vehicle by the end of the year. That would still allow us to pad our savings a little. The 3rd option we considered is to just make our vehicle payments as usual, and use some of the money to make a few small home improvements that we have been wanting to make for a while now. Doing this we could pad our savings about the same as option 2. We have no other debt besides our house, but don't really have much in accessible savings. We will be getting a $2000 payment in September that I plan on putting most of in savings as well. So, if this was your choice to make, what would you choose and why?? I would base this decision on stability of employment and whether you own another car. I personally don't care much about paying off car payments in advance (especially if there is no savings in doing so), because it's not like credit card debt, which goes on and on and on with no finite pay-off date. I do like a nice, fat savings account though. However, if your DH could possibly lose his job and/or this car is an only car, the decision would be a no-brainer and I would pay it off. Quote Link to comment Share on other sites More sharing options...
jamajo Posted January 19, 2012 Share Posted January 19, 2012 I like #2 or #3 b/c the savings is important in case you need to make any unexpected repairs on the car. Since there is no difference in payoff with the car this is what I would do. Quote Link to comment Share on other sites More sharing options...
BakersDozen Posted January 19, 2012 Share Posted January 19, 2012 We have no other debt besides our house, but don't really have much in accessible savings. I didn't start paying off vehicles early until we had a substantial savings (4 month's pay). For me building a good savings is primary. Quote Link to comment Share on other sites More sharing options...
regentrude Posted January 19, 2012 Share Posted January 19, 2012 I would not pay off the car earlier if that does not save you any money. I would put the money towards the mortgage on the house, because that will shorten the time you pay off your mortgage, and thus will reduce the amount of interest you have to pay - so you actually do save money. Just make sure you send the money with a note to apply it to the principal. ETA: If you have no savings whatsoever, put them into savings. Also, if your DH might lose his job - you want liquidity and don;t want the money tied up somewhere. Quote Link to comment Share on other sites More sharing options...
black_midori Posted January 19, 2012 Share Posted January 19, 2012 So the car payment is at 0% interest then? If that is the case, I'd choose option 2 probably. Possibly option 3 - except that if it doesn't go into car payment or savings, it is more likely to be spent on "random stuff" rather than needed home improvements/repairs around here!! :) I could use some new kid desks... :D ETA - I agree with above poster about having a 4-6 months of expenses in a savings account - that should come first!!! Quote Link to comment Share on other sites More sharing options...
2squared Posted January 19, 2012 Share Posted January 19, 2012 I would pay off the car and put the $230 monthly payment into savings for your next car purchase. Why? Because being debt free feels wonderful. Having cash in the bank to pay for your next vehicle feels even more wonderful. Quote Link to comment Share on other sites More sharing options...
melmichigan Posted January 19, 2012 Share Posted January 19, 2012 We are in a similar situation. I will pay off my car this year. The choice was to put the money away and pay off some bills or pay some bills and pay of the car so there was less monthly outlay. With no interest on the vehicle I have to chose to pay it off on schedule and put the money in savings. Quote Link to comment Share on other sites More sharing options...
Joanne Posted January 19, 2012 Share Posted January 19, 2012 $230 is a very modest car payment. With no financial benefit of paying it early, I would not chose an option that pays it down. I would chose the home improvements. If they've been around/pending for quite some time, they "rent space in your brain". To be able to fix them would free up the space AND give joy each time you pass them/feel the impact of them being done. Quote Link to comment Share on other sites More sharing options...
silliness7 Posted January 19, 2012 Share Posted January 19, 2012 We had our taxes done today and will be getting back a pretty nice chunk. Now we have a dilemma. We have a little less than two years left to pay on our vehicle. Our payment is $230 a month, which would be nice to be able to put in savings. The payoff will NOT be less than if we just paid it out over the next two years. The first option we are considering is just paying the vehicle off totally. Our refund is enough that we could pay off our vehicle, but that would only leave us about $800 to put in savings. The 2nd option we are considering is just paying a lump sum, equal to one year of payments and then continuing to make our normal payment, which would pay off the vehicle by the end of the year. That would still allow us to pad our savings a little. The 3rd option we considered is to just make our vehicle payments as usual, and use some of the money to make a few small home improvements that we have been wanting to make for a while now. Doing this we could pad our savings about the same as option 2. We have no other debt besides our house, but don't really have much in accessible savings. We will be getting a $2000 payment in September that I plan on putting most of in savings as well. So, if this was your choice to make, what would you choose and why?? We had to make this decision last year and we decided to pay off our vehicle. The reason is that we wanted to be out of debt. There really is no certainty that the income you are bringing in every month will continue. It's probable, but carp happens. You should be prepared. Pay off the debt and put $800 in savings. Save up your $250 car payments for a couple months for your home-improvement projects or to pad your savings. If something happens and your income disappears or diminishes you won't have debt hanging over your head. You will just have to postpone your projects. Quote Link to comment Share on other sites More sharing options...
trailofsparks Posted January 19, 2012 Share Posted January 19, 2012 $230 is a very modest car payment. With no financial benefit of paying it early, I would not chose an option that pays it down. I would chose the home improvements. If they've been around/pending for quite some time, they "rent space in your brain". To be able to fix them would free up the space AND give joy each time you pass them/feel the impact of them being done. There is a lot to be said for this choice.... If it will impact your outlook positively. But if paying down mortgage principle impacts your psyche for the better, do it instead. Quote Link to comment Share on other sites More sharing options...
StephanieZ Posted January 19, 2012 Share Posted January 19, 2012 Put it all in savings, period. The $2000 from September as well. Quote Link to comment Share on other sites More sharing options...
gardenmom5 Posted January 19, 2012 Share Posted January 19, 2012 if you pay off your car, how much would you save in your interest part of the payment? mortgages have principal and interest and if you pay ahead on your mortage, it will skip ahead on the interest owed. (we paid $100 per month more one year, and our mortgage jumped forward seven years because the money was applied only to principal.) are you saying they are locked together and there would be no difference with your car payment? it seems like you should be able to determine what the principal you owe is on your car loan, and pay that off and not have to pay the interest you would otherwise pay over the next two years. Quote Link to comment Share on other sites More sharing options...
cjzimmer1 Posted January 19, 2012 Share Posted January 19, 2012 We just faced this decision as well (pay off braces early - free financing or save). We chose to pay off the braces. My husband was laid off for 4 months last summer and while we made payments (On braces and a student loan) every month, it was extremely stressful to find enough money every month. Now he's working and gets regular overtime and we have used everything extra and paid off the student loan 2 months ago and the braces last week. Since his position is temp to hire we don't really know how long it will last but if he doesn't get hired, we have now lowered our monthly bills significantly and if he ends up unemployed again, I know it will not be as stressful since we no longer have those 2 things hanging over our heads. We are working on building up savings now (although we won't be able to save anything this month since we had to buy a new refrigerator and a new freezer this month). So I vote for paying off the car, it feel so much better knowing you don't have to pay that bill every month. Quote Link to comment Share on other sites More sharing options...
usetoschool Posted January 19, 2012 Share Posted January 19, 2012 I think it matters how secure your family income is. If there is any chance of job loss I would pay off any debts. I wouldn't want those monthly payments without an income. All of your savings would just go to pay those monthly payments at that point anyway. Put whatever is left over from the tax return and the Sept. money into a savings account and use the $250/month that you used to pay to the car loan to make the home repairs. But I hate debt...it keeps me awake at night and I want to get rid of it as soon as possible. For me it is less stressful to not have that monthly payment hanging over my head. Quote Link to comment Share on other sites More sharing options...
Harriet Vane Posted January 19, 2012 Share Posted January 19, 2012 I would get rid of that car debt. Debt is a millstone around your neck--I would choose freedom. Quote Link to comment Share on other sites More sharing options...
Dolphin Posted January 19, 2012 Share Posted January 19, 2012 Pay off the car. If it is insured properly it is still savings. DH and I had a dry spell between his phD and his job starting. We were able to go to our credit union and take a loan out on the car. This way you don't spend it on lots of small stuff. Use your $230 and have that go into savings (home repair etc...) Quote Link to comment Share on other sites More sharing options...
ThisIsTheDay Posted January 19, 2012 Share Posted January 19, 2012 We have a little less than two years left to pay on our vehicle. Our payment is $230 a month, which would be nice to be able to put in savings. The payoff will NOT be less than if we just paid it out over the next two years. Then paying off early will not save you any money. But it would prevent you from using this windfall now, and at most, paying off your car now might actually *cost* you money, because you could actually earn at least a bit of interest if you were to save the $2000. If paying off the car wouldn't lower the balance, there's no way I'd give them my money early. Quote Link to comment Share on other sites More sharing options...
Soror Posted January 19, 2012 Share Posted January 19, 2012 It would depend to me how much savings you had- I'd want at the minimum $1000 then starting toward an e-fund of at least 3 months expenses. So, I'd put back $1000 if you haven't already, pay off the car and use half the rest for some repairs , 40% for savings and 10% for personal fun money. Then I'd continue paying that $230 towards myself until the efund was done and then do all the house repairs that are needed. Quote Link to comment Share on other sites More sharing options...
jennsmile Posted January 19, 2012 Share Posted January 19, 2012 Why not pay off your vehicle and then set up an account that will draft equal to the car payment into savings? Quote Link to comment Share on other sites More sharing options...
Veritaserum Posted January 19, 2012 Share Posted January 19, 2012 Pay off the car and then put the old car payment toward the house or savings. I'd only keep the car payment and save the refund money if you have reasons to be worried about income and currently have no emergency savings. Quote Link to comment Share on other sites More sharing options...
DusksAngel Posted January 19, 2012 Share Posted January 19, 2012 I'd rather pay of the car, then put the money into savings (until built up), then repairs or toward the mortgage. I hate having debt hanging over me. Quote Link to comment Share on other sites More sharing options...
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