I got my car (2020 Ford Fusion Hybrid SE) new 3 years ago at $25k for a 6 year loan @ 0% interest for entirety of loan, $350 a month payment. I’m about halfway paid off and have about $12.5k left on it. What should I do? I just get sick of paying $350 a month.
If you have the means to pay it off early, I would. It is worse for your credit score, but you will feel great not having that payment hanging around your neck. I can practically guarantee that you won’t regret not having to make that payment each month.
Another consideration is that most auto loans require you to have full coverage for your vehicle. If you pay it off early you can reduce coverage if that’s right for you.
With inflation your money is worth less over time, so you’re actually paying less for the car if you do the payments over a few years. Especially these days. Just since 2020 the dollar has inflated 18%
At 0% interest the cost of your money is nothing, so you save nothing by paying it off early. you will be better off taking your extra money and putting it towards other debts (1st) or investing them (2nd). In fact, even if you do nothing with you extra money now you will still come out ahead because of the future value of the dollar decreasing with inflation.
Is it absolutely 0% or is it 0% with a $10/month administration fee? If the former, don’t pay it off early, just set up a standing order/direct debit and let it pay itself down. If the latter, you need to calculate the comparison rate (which will get higher the closer you get to zero balance), and work out what the break even is. Then carry on paying until you hit the point that the effective interest is greater than the interest on your savings account and at that point pay it off in full.
If you don’t pay it back though, won’t your car get repoed? I feel like I’m missing something with the responses here.
Edit: thanks chums, @Num10ck, @bstix. Thank God this is nostupidquestions because I knew I was missing something basic.
I interpreted the title to mean, “continuing to pay off the remainder as usual,” as opposed to in a lump sum.
If you drop your coverage from comp/collision to liability only, you’re paying less, and assuming more risk - because if you get in an accident, your insurance will not cover the cost of repairing your car (or receiving a payout if it’s a total loss). A 2020 model year car is still worth having comp/collision coverage on.
Not sure if you’re just telling us the amt or of you’re implying it’s too high/low. Sounds about right given the age and cost of your car, without knowing anything about you.
Really the only reason you’d want to go liability only is if you own the car outright, and the insurance value of the car is very low. If you have a $500 deductible, and your car is only worth $1500, you’ll get paid $1000 on a total loss - which would be just about any accident whatsoever, even one that would leave the car safely driveable. It wouldn’t make sense to make a claim that would only give you $1000, and make you have to buy a new-to-you car and take on payments again, so it doesn’t make sense to pay for that coverage in the first place.
Because as long as there’s a lien on your car, the bank that owns it wants to make sure it’s thoroughly insured until it’s paid for. Their insurance is mandatory and usually much more comprehensive (and expensive).
Pay it off. New car loans should not be more than 5 years and used should not be more than 3. You risk hitting a point where you’re paying payments and repairs at the same time.
If you need to take out another loan for something else then pay it off. So you have less debt on the books. Otherwise just keep the loan. It’s zero interest
If you’re not 100% sure that you’ll be able to comfortably pay that $350 each month for the remaining 3 years then pay it off now. Otherwise keep the loan.
If it’s always $350 a month, just let the debt ride.
Over 6 years, $350 in year 1 is worth more than $350 in year 6 thanks to inflation (350$ in 2017 would be able to buy you $435 worth of goods or services today). If you have $12.5k sitting around - Invest that into something stable, collect the interest and just keep paying off the loan slowly because that’s the cheapest way to do it (unless we end up with negative inflation in the next 3 years - which seems unlikely, but who knows??)
Cars tend to be financial liabilities, depreciation on a new car is just tremendous - next time just get a beater with working AC for as little as possible, do your maintenance and run it into the ground.
I mean think about how much money that 12.5k could generate for you, especially since you’re not paying to use the car manufacturers money. The interest rate is the cost to borrow the money… you’re getting it for free. Put the money…we’ll ask a fiduciary they have to give you good advice not based on a commission or profit.
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If you have the means to pay it off early, I would. It is worse for your credit score, but you will feel great not having that payment hanging around your neck. I can practically guarantee that you won’t regret not having to make that payment each month.
Technically, if you just pay off 0% interest loan just because you can, you’re losing money(interest).
It is not only needless but is also an actually worse financial decision.
Another consideration is that most auto loans require you to have full coverage for your vehicle. If you pay it off early you can reduce coverage if that’s right for you.
But they should know that AS SOON as you drop coverage, THAT’S when it gets totaled.
With inflation your money is worth less over time, so you’re actually paying less for the car if you do the payments over a few years. Especially these days. Just since 2020 the dollar has inflated 18%
At 0% interest the cost of your money is nothing, so you save nothing by paying it off early. you will be better off taking your extra money and putting it towards other debts (1st) or investing them (2nd). In fact, even if you do nothing with you extra money now you will still come out ahead because of the future value of the dollar decreasing with inflation.
So the dollar decreasing due to inflation is bad right?
Is it absolutely 0% or is it 0% with a $10/month administration fee? If the former, don’t pay it off early, just set up a standing order/direct debit and let it pay itself down. If the latter, you need to calculate the comparison rate (which will get higher the closer you get to zero balance), and work out what the break even is. Then carry on paying until you hit the point that the effective interest is greater than the interest on your savings account and at that point pay it off in full.
Absolutely 0
If you don’t pay it back though, won’t your car get repoed? I feel like I’m missing something with the responses here.
Edit: thanks chums, @Num10ck, @bstix. Thank God this is nostupidquestions because I knew I was missing something basic.
I interpreted the title to mean, “continuing to pay off the remainder as usual,” as opposed to in a lump sum.
they are talking about paying it off (early lump payback rather than monthly as agreed)
He’s asking if he should pay the rest of the loan off now or keep paying in installments, not if he should just stop paying it.
Keep the loan. It’s the best deal you’ll see in your lifetime.
Does that $350 include car insurance? Once you pay off the lien and own the car, insurance should be a lot cheaper.
Why would insurance be cheaper?
Because liability car insurance (just covers damage for who/what you hit) is cheaper than comprehensive car insurance (also covers you and the car).
Finance companies will usually require you to have the latter through the end of the loan.
If you drop your coverage from comp/collision to liability only, you’re paying less, and assuming more risk - because if you get in an accident, your insurance will not cover the cost of repairing your car (or receiving a payout if it’s a total loss). A 2020 model year car is still worth having comp/collision coverage on.
Glad I wasn’t the only one who thought suggesting liability only ins on a 3 year old car was a silly suggestion.
My insurance for full coverage is $97 a month
Not sure if you’re just telling us the amt or of you’re implying it’s too high/low. Sounds about right given the age and cost of your car, without knowing anything about you.
I’m 29, been driving since 2020
Really the only reason you’d want to go liability only is if you own the car outright, and the insurance value of the car is very low. If you have a $500 deductible, and your car is only worth $1500, you’ll get paid $1000 on a total loss - which would be just about any accident whatsoever, even one that would leave the car safely driveable. It wouldn’t make sense to make a claim that would only give you $1000, and make you have to buy a new-to-you car and take on payments again, so it doesn’t make sense to pay for that coverage in the first place.
Because as long as there’s a lien on your car, the bank that owns it wants to make sure it’s thoroughly insured until it’s paid for. Their insurance is mandatory and usually much more comprehensive (and expensive).
Pay it off and start paying yourself $350 a month.
No, don’t do this. Invest the lump sum of money now because at zero interest, you’re not gaining anything by paying it off.
The lump sum of 12k will be worth much more invested now than 350 a month trying to get back to that amount
Pay it off. New car loans should not be more than 5 years and used should not be more than 3. You risk hitting a point where you’re paying payments and repairs at the same time.
If you need to take out another loan for something else then pay it off. So you have less debt on the books. Otherwise just keep the loan. It’s zero interest
If you’re not 100% sure that you’ll be able to comfortably pay that $350 each month for the remaining 3 years then pay it off now. Otherwise keep the loan.
If it’s always $350 a month, just let the debt ride.
Over 6 years, $350 in year 1 is worth more than $350 in year 6 thanks to inflation (350$ in 2017 would be able to buy you $435 worth of goods or services today). If you have $12.5k sitting around - Invest that into something stable, collect the interest and just keep paying off the loan slowly because that’s the cheapest way to do it (unless we end up with negative inflation in the next 3 years - which seems unlikely, but who knows??)
Cars tend to be financial liabilities, depreciation on a new car is just tremendous - next time just get a beater with working AC for as little as possible, do your maintenance and run it into the ground.
I have no interest in ever buying privately owned again
Doing this right now, getting/learning manual makes it fun. Plus, at least for me, the used standards come cheaper.
I personally love standards. It’s more fun, and it comes with passive theft deterrent
I mean think about how much money that 12.5k could generate for you, especially since you’re not paying to use the car manufacturers money. The interest rate is the cost to borrow the money… you’re getting it for free. Put the money…we’ll ask a fiduciary they have to give you good advice not based on a commission or profit.