Your right, the car wasn't the brightest idea but I had to ditch a vehicle that was paid for for at least 6 years. A person that files chpt 7 with a repossion isn't really in the drivers seat. That's the only deal I could get with a dealer I've dealt with for over 20 years. Having said that:
That's why I'm here asking for advice, I usually want to do the opposite of what I would normally do because I just can't seem to get it right.
I'm single and bring in about $64k/year and I'm way behind in the retirement game. Late bloomer...
I have 100k in one IRA from previous employer.
27K in current employers 401 whick I can borrow 50% from.
Contribute 6-10% with 50-50 match up to 6%.
5K in high yield savings.
I was hoping to use the 5K for emergencies and moving expenses and get a house with close to nothing down, seller pay closing costs.
The car loan has helped my credit, currently (680 FICO).
I managed to pay the car down from 21k to 19K in 6 months @ 14.4%
I tried to be analytical about this to reduce my generally poor judgement
Let me try to explain..
Borrow 13k from 401 @ 7% = 267/month for 5 years ttl- $17,242
Invest 167/month ($440 orig payment - new $267/month) = $10,700 in 5 years @ 6% yield.
Paying off 13K car loan = 8K in interest savings.
Leaving 13K in 401 @ 6% earnings =15,600 in 5 years.
The way I see it, right or wrong, I dunno... If I leave 13k in the 401 @ 6%, in 5 years I would have 15,600.
Borrowing now, in 5 years I would have saved 8,000+17,242+10,700=$35,942. $35,942-$15,600=$20,342
If I pay the car off, I would have the option of selling and trading down and re-investing the difference.
It sounds too good to be true and it defies all the rules that I'm trying to abide by. That's what has me stumped....
LuxLiving made a good point, I'm losing 25% just to repay the 401 loan....
That's good advice, as well as ditching the car as suggested by JBL, Sweeps & Disney.
I don't have many working years left and I need to make the most of it.
Postpone the house with the tax incentives associated and aggresivly pay off or trade the car? Is that the general concenses?
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