Pay Off a 0% Auto Loan Early?

[eiui thelus]

When if ever is this a good idea? DH wants to get it paid down, but at 0%, I say what's the hurry?

[hegemony]

I see nothing wrong with it as long as you are maxing your retirement savings and have 12 months in an emergency fund.

 

the car runs better when the title is in your hands.

[Uncle Leo]

the car runs better when the title is in your hands.

It also runs better after you wash it.

 

Personally, and I know it's not wholly logical but rather emotional, I would pay it off because there's something about car payments specifically that I just detest.

[smart1n]

As long are your are disciplined. I would put the "extra" money in a high yield savings/checking account or buy some IBonds. When you have the amount saved, you can pay off the loan.

 

I dislike owing as much as the next person, but in the case of 0% I would take the extra money and make more money off of it.

[GEORGE]

When if ever is this a good idea? DH wants to get it paid down, but at 0%, I say what's the hurry?

ZERO LOGIC (unless they are going to send you a check for paying off the debt early)

[hegemony]

sometimes logic is not a simplistic view on dollars and cents.

 

not everyone here wants to remain in debt forever.

 

one size does not fit all. not even close.

[eiui thelus]

DH is 100% totally/permanently disabled so no 401k. We have no retirement/emergency fund, $0.

I showed DH how we can pay off our PLOC 12% early if nothing goes wrong with the house or medical and he's excited to throw money at the auto loan too. Our house usually eats all of our money.

I'd like a high yield account, but they always want more money to open than what we can muster at one time.

[hegemony]

DH is 100% totally/permanently disabled so no 401k. We have no retirement/emergency fund, $0.

I showed DH how we can pay off our PLOC 12% early if nothing goes wrong with the house or medical and he's excited to throw money at the auto loan too. Our house usually eats all of our money.

I'd like a high yield account, but they always want more money to open than what we can muster at one time.

 

I would show him the math. paying off 12% debt and saving should be priorities in my view. good luck!

[Kevin20]

DH is 100% totally/permanently disabled so no 401k. We have no retirement/emergency fund, $0.

I showed DH how we can pay off our PLOC 12% early if nothing goes wrong with the house or medical and he's excited to throw money at the auto loan too. Our house usually eats all of our money.

I'd like a high yield account, but they always want more money to open than what we can muster at one time.

 

 

In your case I would absolutely NOT pay off the car loan a single day early, under any circumstance. Your need to have cash savings is too pressing.

 

Your priorities should be to build up some liquidity (cash savings), build some retirement funds, then address any debt that charges interest, and address any insurance needs. Paying off a zero percent car loan is surely the lowest priority of all. What if something happens to you, can hubby fend for himself? Do you have life and disability insurance on yourself? I'd be sure to cover those sorts of bases first before spending a penny reducing a zero-percent car loan.

 

I'd be tempted never to pay off a 0% loan if I could avoid it, and would do so only if I was pretty fat on savings and investments, and otherwise debt-free.

Edited January 14, 2010 by Kevin20

[Daddy]

the car runs better when the title is in your hands.

 

Man, this sounds like something DR would say. LOL

[GEORGE]

the car runs better when the title is in your hands.

 

Man, this sounds like something DR would say. LOL

PART IN RED

[hegemony]

the car runs better when the title is in your hands.

 

Man, this sounds like something DR would say. LOL

even though you often go out of your way to insult me, as I have said often, there are some things your guru says that I agree with (e.g., having a budget).

Edited January 15, 2010 by hegemony

[athensgaguy]

One possible advantage to paying it off would be an optional reduction in insurance coverage.

[hegemony]

One possible advantage to paying it off would be an optional reduction in insurance coverage.

good point!

[Kevin20]

One possible advantage to paying it off would be an optional reduction in insurance coverage.

good point!

 

 

Ah, good catch. Would be worthwhile to do the math on that. With a new car loan I'm now paying about $92 a month for insurance. Previously with a paid-for old beater, I was paying about $40 for liability-only.

 

Though, still wouldn't dream of it in OP's case here.

[Daddy]

the car runs better when the title is in your hands.

 

Man, this sounds like something DR would say. LOL

even though you often go out of your way to insult me, as I have said often, there are some things your guru says that I agree with (e.g., having a budget).

 

I don't insult you. I like you. I respect your financial wisdom also!

[radi8]

the car runs better when the title is in your hands.

 

Man, this sounds like something DR would say. LOL

 

 

You need to stop bringing up DR unless it's somehow germane to the discussion. Frankly those instances will be very, very rare.

Thank you.

[GEORGE]

So are you going the LOGICAL way and keeping the 0.00% APR

 

[MB82x]

Is it always going to be 0%, or will that eventually run out? If it's going to stay at 0% - then it's really six to one, half a dozen to the other...

 

Waiting to pay it off: You'll have the extra money to invest and earn interest on... you'll have extra money now.

 

Paying it off now: You won't have to deal with it later.

 

Unless it's a huge amount owed and you're sitting on that lump sum - I don't think it really matters. If you're talking about blowing a five figure nest egg in one shot, I wouldn't do it.

[eiui thelus]

It'll always be 0% and we're talking $20k+. The best I could do is an extra payment once and a while. It isn't doable over a long period. The house is again eating some of the extra I planned to put on the PLOC next month.

 

So, is this doable; Pay bills that can't be put on a CC, use the cash to pay down the PLOC, use my 0% till March cc for food/gas/misc then BT whatever I can't pay off in March to the Navy 4.9% ?

[MB82x]

Yeah, in that case I'd just make the payments required to keep it current. If it gets sent to a CA, then it won't be 0%...

[bullthistle]

Personally I hate car payments however not everyone can pay cash, so if you have the extra dough why not open a Roth? It is after tax money just like your car payment and when you start withdrawing you will not pay taxes after 59 1/2. It doesn't take a large sum to open a discount brokerage account, I prefer Fidelity, so you can spend your spare time researching stocks or bonds versus eating out.

[eiui thelus]

the car runs better when the title is in your hands.

 

DH agrees with this wholeheartedly!

 

< there's something about car payments specifically that I just detest.>

 

Me too, especially when the payments outlast the Warranty!

 

Yeah, in that case I'd just make the payments required to keep it current. If it gets sent to a CA, then it won't be 0%...

 

I don't know how a CA got thrown into this discussion, we're not in danger of defaulting on anything.

[Uncle Leo]

Not arguing necessarily against building up the savings account per se, but adding another perspective to ponder...

 

When you pay off your car... you get peace of mind in knowing that... if times do get bad... that cars is YOURS... no threats of repo, no worries about "Will I be able to get from here to there without a tow truck following me?", and so on. Transportation, and the ability to 'conduct life', is one aspect of life that is reasonably secure.

[LBCS]

One possible advantage to paying it off would be an optional reduction in insurance coverage.

good point!

 

 

Ah, good catch. Would be worthwhile to do the math on that. With a new car loan I'm now paying about $92 a month for insurance. Previously with a paid-for old beater, I was paying about $40 for liability-only.

 

Though, still wouldn't dream of it in OP's case here.

 

 

 

The OP has a LOC and insufficient savings - reducing insurance to liability is not an option and should not be a factor in the calculations.