Pay off car loan?

[ua_guy]

I've got 12 months left on a 0%/36 car loan with a balance of $6970, $580 monthly payment.

Conventional wisdom would direct me to NOT pay off the loan, since it costs me nothing to carry the debt. From a cash flow perspective, however, the money seems like it could be doing something else, if nothing other than paying off 1 of our 3 vehicles. It's not a great situation to have 3 car payments, but we put down almost 60,000 miles of driving last year. The payment could go towards doubling down on another vehicle.

The money would come from savings which is topped up at slightly over 6 months expenses. Not having the expense of the additional vehicle loan would alter than number by its balance $6970. We are also on tap to see a cash influx from a bonus ($17,000) in the next 60 days or so.

We're not hurting for money, but one of our goals in our new home is to move money away from vehicle payments and start attacking our mortgage with some aggression.

What makes sense here? Feel free to ask any clarifying questions.

[ua_guy]

110 views and no replies? That's not like SA!! I still haven't done anything with the loan.

[bjl584]

You seem to be in a good position financially. I'd probably just pay it off and be done with it. You've only got a year left on the loan anyway.

[bigdaddybus]

Since you are somewhat hesitant to pay it off now, I would pay it off with a portion of the bonus coming in the next month or two

[disneysteve]

I've got 12 months left on a 0%/36 car loan with a balance of $6970, $580 monthly payment.

3 car payments

We are also on tap to see a cash influx from a bonus ($17,000) in the next 60 days or so.

Assuming the bonus comes in as anticipated and there is no other pressing need for that money, I'd use it to pay off one or more of the car loans. What are the other two loans as far as balances and interest rates? Are they all 0%?

[Petunia 100]

110 views and no replies? That's not like SA!! I still haven't done anything with the loan.

Why pay off the 0% interest loan when there are other loans? To use the money to your best advantage, pay off the highest rate debt first.

Are you saving/investing for retirement? If so, how much (percentage-wise)?

[Eagle]

Why pay off the 0% interest loan when there are other loans? To use the money to your best advantage, pay off the highest rate debt first.

Are you saving/investing for retirement? If so, how much (percentage-wise)?

We have a 0% interest loan for 60 months on furniture. Was about 10k a year ago and now we have 4k left on it. We're just paying a little over the minimum at $100 a month since early summer. Instead, we're putting everything we can towards the mortgage which has 4.625% interest.

Debt Avalanche for the win!

[autoxer]

We're not hurting for money, but one of our goals in our new home is to move money away from vehicle payments and start attacking our mortgage with some aggression.

Try to clarify your goal a little better.

If your goal is to pay the vehicles off first and then start paying down the mortgage quicker, then go ahead and pay it off. This has the side effect of improving available cash flow by eliminating a required payment, but is that important to you? Do you expect to have months where you need that extra cash flow or will that extra cash flow just get squandered?

If your goal is to lower your total debt burden, then put all excess cash flow towards the higher interest rate debts. The lower interest debts will go to their full term, so it'll take longer to free up the required monthly payments, but that will be better for your net worth.

I hate 0% financing, because they are just juggling numbers around to make it seem like you are getting something special. I know that borrowing money isn't free, so that usually means the price of whatever you are purchasing is elevated to cover these special financing deals.

I did pay off a low interest rate (1.3%) car loan early, but only because the bank kept insisting that I lower my insurance deductible. I wasn't willing to lower my deductible, which would raise my insurance premium, in order to keep the low rate debt.

[ua_guy]

Maybe I'll make another thread to explain my goals better and outline our current financial position. I don't feel like we're 100% on track, but we have good resources, and are starting to plane out after a year of living in our new home, so things are much more predictable and stable than they were before. A financial checkup from an outside perspective is never a bad thing.

Basically we want to pay down our house--it's our largest expense and highest interest rate, and will be a major contributing factor when it's time for retirement. Paying off a car or two starts to free up cash flow, and the car in question can be erased from our liabilities with relatively little impact to our cash savings.

[snafu]

If you have a thus far undesignated bonus I'd apply it directly to the mortgage principal. Likewise the tax refund you get as a result of mortgage interest. The issue in my mind is how mortgage amotorization tables work. Interest is front loaded so that your monthly payments go mainly to interest, taxes, mortgage insurance if your DP was lower than 20% and finally a small amount to principal. By designating extra sums directly to principal along with your regular sum, you reduce the years of payment significantly and thereby magically melt off years and years and years of interest.

In our experience, intermittent payments from small, irregular part-time projects knocked 17 years off our mortgage at a time when rates were far higher.

[Retired To Win]

Why pay off the 0% interest loan when there are other loans? To use the money to your best advantage, pay off the highest rate debt first.

+1 THIS.

[YLTL_Dan]

I say pay off the loan and get used to buying things with cash. The car loan is already causing undue burden on you mentally, so take it out! As you said, then you can start saving for the next car fund - which you can hopefully purchase with cash.