If you have a decent loan (<6% and 60 months), I would keep the loan full-term, why pay it off quicker? If you have a toxic loan (one of those 'we can put you in any new car' loans, >9%) then it makes sense to prepay.
Here's what we do. Say we want a new $30k car. Two choices.
A. I could sell $33,000 from our brokerage account, use $3k to pay the tax on the stock profits and use the $30k to pay cash for the car. Or-
B. I could get a 100% loan (no down payment, include tax, license, everything) and pay about $33k over 60 months (about $3k interest). And leave our own $30k in the Stock Index. Plus we sell the old car privately for about $4k and add that to the stock fund. So that is $34k in our Fund where it historically doubles about every 6 years. (Rule of 72) Ie, about $68,000 shortly after the car is paid for. (We've done that with every new car since 1985 - we paid cash for that one, interest rates were at about 15% that year.)
Disclosure: Some folks like to be "debt-free", and some of us try to put our money at its 'highest and best use'. I do the latter.
If you bought it in 2013 you likely been paying interest first and only interest on this loan. So that savings of paying it off are limited. There is a site thats free on Crown Financial where that can be calculated. Now if the payments are killing you and it would make you more comfortable losing them you should figure out if you are making more investing or would it be better to pay it off. Realize though the time to think this all out was before you bought the Tahoe and learn for next time.
1. bought the dealer demo and saved big on the price,but still getting full warranty and tucking the cost in a low interest home equity loan that was tax deductible (disadvantage the loan is guaranteed w/ YOUR HOUSE as collateral)
(windstar- pre 2009 economy)
2. bought a used Saturn for less than $10,000 on a credit union loan of 3 years paying it off in 6 mo. to improve our credit w/ the C.U. and FICO. (driven by college kids and now sold for $2000. to DD after $800. of repair)
3. bought the Montana thru the executive loaner program. They had to drive them for awhile as part of their job. We got a C.U. loan again at a low rate and substanially more off that way on a loaded vehicle. Still driving it 2004-2015 plus.
4. just bought an Impala limited for DH cash w/ inheritance money I got from Ddads estate from 2 yrs. ago. Almost even incl 2 yrs. Interest. no extra money laid out, had enough to insure it for the 6 months.
We never take out dealer loans. If nothing else it kills bargaining power. Also I wanted you to see unconventional ideas for you future.
We never take the dealers hit on new vehicles either. Thats someone elses job to bug test it and buy the price drop when it leaves the lot.
My Ds just bought his first vehicle cash $7500. for a 2001 Dodge Dakota truck w/ his deployment money. He had it checked out and dumped another $1000. into it (incl. floor mats splurge-hey young man pride.lol). We shall see how this works. A bit old for me but 89,000 original miles and its a truck. He has established credit using his CC and paying immediately when he gets the bill. Army ins. rates w/ a perfect driving record helped him get a low rate.
Disclosure-being debt free can be the best use of you rmoney in this unstable economy. Investing isnt guaranteed money either. We have had my DH lose his job 2x this year through no fault of his own. This is the 1st and 2nd time in 31 years. He now is working limited time contract to contract and i cant say how elated we are to be debt free,frugal and to keep a stockpile.
Thanks frugalwarrior2 and old guy, I have a decent loan( 5%) I talked to the credit union that I have the loan with and they said I could pay half every 2 weeks since I was recently laid off and struggling at the moment.
your welcome but i guess your title was misleading for me.
Arent C.U.'s great.
but what diff. does it make. 1/2 every 2 weeks is the same as 1x per month full??
Hope you find something soon. DH has been through the mill finding a postion we can live w/.
I have no clue what you are asking for in your post. The title implies you are asking how to pay off the vehicle quicker? The answer is to pay more each month. The post itself implies how to keep your current vehicle, and not get into another loan. The answer is to take care of it.
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