Double Up on Car payments or....

**kv968** · 03-03-2007, 06:04 AM

Originally posted by timetosave View Post

put that extra money in the bank so it can draw interest and then make the balloon payment at the end of the smartbuy?

Thanks

Yes. Just make sure you put away enough extra to cover the balloon payment. That is of course if there's no interest being accrued with your current payments. I don't think there should be but you should check to make sure.

**tinapbeana** · 03-03-2007, 06:15 AM

the interest question is the biggie, like pointed out previously.

you'd said you'd called the finance company and they said any extra sent in gets put towards the principle. what i'm wondering is if the 'principle' is the balloon payment at the end, or the total value of the vehicle?

basically, if you have 2 years left in the smart buy, if paying extra every month will simply prevent you from having to pay the one large balloon payment at the end of the term. if so, and if that payment isn't incurring interest (which i don't think it is as a balloon payment, which is typically a set dollar figure), then IMO you would be better off stashing the 'extra' payment in a high yield savings account rather than send it it. once you reach the dollar figure of the balloon payment, you would keep saving that dollar figure towards another goal...

like mentioned previously, saving the balloon payment yourself and paying it as one lump would earn you interest on the money. this is all, again, assuming the balloon payment does NOT accrue interest...

**timetosave** · 03-03-2007, 06:33 AM

Originally posted by tinapbeana View Post

the interest question is the biggie, like pointed out previously.

you'd said you'd called the finance company and they said any extra sent in gets put towards the principle. what i'm wondering is if the 'principle' is the balloon payment at the end, or the total value of the vehicle? ...

The balloon payment at the end is the total value of the vehicle

Originally posted by tinapbeana View Post

basically, if you have 2 years left in the smart buy, if paying extra every month will simply prevent you from having to pay the one large balloon payment at the end of the term. if so, and if that payment isn't incurring interest (which i don't think it is as a balloon payment, which is typically a set dollar figure), then IMO you would be better off stashing the 'extra' payment in a high yield savings account rather than send it it. once you reach the dollar figure of the balloon payment, you would keep saving that dollar figure towards another goal......

Ok, I just got off the phone with GMAC again (I'm learning so much) this is what I was told:

Finance charges are preset into my payments. No interest is being accurred. The principle is the total value of the vehicle and the baloon payment does ot accrue interest

So I will take your advice and stash the 'extra payment' into a high yield savings account rather than sent it in with the goal of reaching the total figure of the balloon payment.

This makes perfect sense. Thank you.

Originally posted by tinapbeana View Post

like mentioned previously, saving the balloon payment yourself and paying it as one lump would earn you interest on the money. this is all, again, assuming the balloon payment does NOT accrue interest...

This is what I will do. Wow...thank you so much

**kv968** · 03-03-2007, 06:44 AM

Originally posted by timetosave View Post

So I will take your advice and stash the 'extra payment' into a high yield savings account rather than sent it in with the goal of reaching the total figure of the balloon payment.

Just remember, don't touch this money for anything else

If you do, there's another debt you're looking at in 2 years.

**timetosave** · 03-03-2007, 07:05 AM

Using the money is another of my fears...which is another reason I've not changed my deductions...I'm so afraid I will spend the money.

The up side of all of this is that if I decide I do not want the car in 24 months I pay a 250.00 disposal fee and walk away. I will take into consideration at that time what the car is worth vs. what I still have to pay. But the buy out is a huge amount I have to save at aleast 600 monthly for the next two years in order to meet the buyout...14,328...I honestly don't feel the car is worth that. But having that amount in the bank will allow me to purchase a used car outright.

I'm getting there...

**creditcardfree** · 03-03-2007, 07:16 AM

Based on everything you explained. I think this is the right choice. You simply continue making your regular payment for the next 24 months and stash money away to pay the balloon and keep the car or make another decision.

A newer used car for $14k paid with the cash that you saved...priceless (as they say in those mastercard commercials). You will feel so free when you make a purchase like that.

You are getting there and I'm excited for you!!

**LuxLiving** · 03-03-2007, 07:31 AM

One way of semi-locking it away is in SMALL CD's all within the same payout time frame. ING has this option.

I'm rather down on them at the moment for some of their anti-fem statements that were made to me personally BUT, they do offer a half-way decent CD program that can be purchased in SMALL INCREMENTS.

You could try buying SMALL CD's each month that will payout in the 2 year time frame or less.

Say in...

month 1 - March 07 you buy a 2 year CD w/the extra 450ish car payment amount.
month 2 - April 07 you buy a 18 month CD w/the extra
month 3 - May 07 you buy a another 18 month CD
month 12-buy a 12 month CD
month 16 - you buy a six month CD, yada, yada yada into smaller time frame increments
month 19 - you buy a 3 month CD or you've developed the saving habit by then and you just put the 450ish in a MMaccount that is designated for the balloon. As they domino you roll that payout into the MMaccount and get ready to send the money off to pay the balloon.

The money is somewhat locked away long term in CDs. Yes, you could conceivably get to it but it is a hassle AND you'd pay a penalty in lost interest if you cashed out early.

Conceivably you could do the same thing with any tax monies. Get as much as you can in your paycheck. Still don't feel comfortable? Lay a bit aside (say $50) each pay day in a CD that is designated to pay any unforeseen tax payment should it arise. I'm betting by then that you'd be right on target w/the taxes or only off by a small amount and that money if not all of it could be used for other purposes.

I think the main point for you to arrive at is for you to decide that YOU are in charge of the money, not the money in charge of you.

**timetosave** · 03-03-2007, 08:56 AM

Lux, would you mind if I PM you questions about this?

thanks

**kv968** · 03-03-2007, 09:07 AM

Originally posted by LuxLiving View Post

One way of semi-locking it away is in SMALL CD's all within the same payout time frame. ING has this option.

I'm rather down on them at the moment for some of their anti-fem statements that were made to me personally BUT, they do offer a half-way decent CD program that can be purchased in SMALL INCREMENTS.

That's a good way of doing it also if you think the fact that the money is "tied up" will deter you from touching it.

Lux, ING made "anti-fem" statements to you?

**LuxLiving** · 03-03-2007, 09:08 AM

No problem, just get with Jeffrey and he'll get you my email addie.

If it's a question about ING's faux pau, then you might want to check my blog entry about it:

Lux Living Frugalis - Big Orange Can Kiss My Rosy!

**disneysteve** · 03-03-2007, 09:21 AM

Originally posted by timetosave View Post

So I will take your advice and stash the 'extra payment' into a high yield savings account rather than sent it in with the goal of reaching the total figure of the balloon payment.

I just wanted to say congrats! Working through those options will end up earning you a few hundred dollars in interest probably (I don't recall the exact figures involved). Won't that feel great.

**timetosave** · 03-03-2007, 09:57 AM

Originally posted by LuxLiving View Post

No problem, just get with Jeffrey and he'll get you my email addie.

If it's a question about ING's faux pau, then you might want to check my blog entry about it:

Lux Living Frugalis - Big Orange Can Kiss My Rosy!

Who is Jeffrey?

**LuxLiving** · 03-03-2007, 10:13 AM

Jeffrey is one of the owners of this website/forum/business.

Jeffrey Strain info@savingadvice.com

**tinapbeana** · 03-04-2007, 07:09 AM

Originally posted by timetosave View Post

The up side of all of this is that if I decide I do not want the car in 24 months I pay a 250.00 disposal fee and walk away. I will take into consideration at that time what the car is worth vs. what I still have to pay. But the buy out is a huge amount I have to save at aleast 600 monthly for the next two years in order to meet the buyout...14,328...I honestly don't feel the car is worth that. But having that amount in the bank will allow me to purchase a used car outright.

timetosave, this paragraph right here is HUGE and deserves to be pointed out again. i think it shows just how far you've come!!!

i think saving the money you would pay towards the car and using that to instead buy a car outright is a fantastic idea if you're open to it. and, in case you're wondering what kind of car you could get: in september i bought a '05 focus still under manufacturer's warranty for $12,500. with 14k in the bank, the odds are very good that you can get a pre-owned vehicle still under warranty. especially paying cash, that gives you extra bargaining room.

and then, you'll be saving the 500 per month you have extra now PLUS you won't have a car payment!!! makes it that much easier to keep saving like you were before (so you can make repairs to the car and buy the next car years down the road), and use the previous car payment to pay down other debt or increase retirement or college savings.

Double Up on Car payments or....