Does My Financial Decision Make Sense?

[Shazamalingo]

I would keep the loan - don’t pay it off. That is still a relatively low rate. Always better to have cash on hand for a rainy day. Economy may get bad next year.

This too. Money in pocket, even if costs you, is a nice buffer.

As long as you don't get fleeced on the rate and you aren't financing because you honestly cannot afford the purchase, there are solid benefits.

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[0ne]

If you pay $45k cash, that money is gone. If you finance it, especially with rates we saw until 6 months ago (such as 2% for up to 7months), all you need to do is beat 2% a year. If you do a CD, you win (by how much depends on a lot of facts). If you invest that over 6 years, you’re likely way up (index fund should get you 50-65% in 6 years historically).

As interest rates go up, your reruns will vary. Investing in the stock market is not slam dunk.

So one cannot universally say that financing a a lot is a poor decision.

-nor is it ever a good decision in a new economic environment with whipsaw movements, rash decisions and no more easy money guaranteeing unrealistic unsustainable returns, debt also has a mental component to it.

 

[Cole83]

I would pay it off. The gross difference is .4% and you are still making a payment. Anyone doing math here on your return on the investment is assuming you keep making payments and don’t touch the investment. At that point you are committing extra cash in the future to make the payments. Pay off the car and use the “payment” amount as an investment and you will still earn plenty of interest with no payment over your head or debt on the line for what is quickly becoming a declining asset again. Anyone saying otherwise here is really bad at calculating a return. Whether you have no debt or $45k in the bank, you should be finding a way to make interest income. .4% difference is short changing yourself IMO.

 

[Shazamalingo]

-nor is it ever a good decision in a new economic environment with whipsaw movements, rash decisions and no more easy money guaranteeing unrealistic unsustainable returns, debt also has a mental component to it.

Again, there's a lot of baked in assumptions there. People have historically made a killing in new economic environments. For example, those who invested heavily and broadly in the market in April 2020 have been treated very well, even with the recent downturn. Same for those in 2008.

Those chasing meme stocks typically did not sell at the right time and have gotten hosed.

Universal statements are hard to make...

 

[72F262]

So much also depends on your overall financial position. Is this your only debt, house paid off, retirement fully funded, correct insurance in place, etc.

If you are living pay check to pay check, taking on any new debt is a mistake IMO. However, if you have all the other bases covered, I would finance the vehicle and take out the new CD. (Again, as others have pointed out this also depends on your tax situation).

 

[M4Madness]

debt also has a mental component to it.

Isn't that the truth! I had the cash to buy my Bronco outright, but chose to finance half of it. My last vehicle payment was in 1995, and I haven't even made the first payment on the Bronco and I think about it daily. Lol! I'm going to make 3-4 payments a month to get this over with.

 

[72F262]

Isn't that the truth! I had the cash to buy my Bronco outright, but chose to finance half of it. My last vehicle payment was in 1995, and I haven't even made the first payment on the Bronco and I think about it daily. Lol! I'm going to make 3-4 payments a month to get this over with.

This is very true as well. Worrying about it is not worth it.

 

[Headsong]

Lots of folks missing key issues!
A. Is it a biz vehicle? If so, the interest and taxes are a wash.
B. A CD is the wrong question.... Why not invest better?
C. Most importantly, what type of loan is this? Unless simple interest, you've already paid most of the interest... Don't pay it off.

 

[M4Madness]

This is very true as well. Worrying about it is not worth it.

Thankfully the Bronco is my only debt and I have the funds to pay it off at any time I choose.

 

[dgorsett]

The maths don't always prove it out, but I haven't had any debt since 2009 and boy do it feel good!

 

[Yukon65006]

Not even close to enough information to make an informed opinion. While there are many on this forum that I am sure have the knowledge to answer the question this is not the place I would seek the answers.

Even using forums that are geared towards answering this will get varying answers. Try asking the same question at both Mr Money Mustache and Bogleheads to see the differences.

I went from no debt to a house payment, 2 car payments and retired in less than two years. It all works within my budget and portfolio. When I asked the finical forums questions concerning my situation it was all over the place from I was good to go to I was nutz.

Do what you feel comfortable with and live with your decision, hind site is 20/20.

 

[NotApplicable]

For a 4.25ish return I’d be hitting up treasuries right now rather than CDs personally

Lots of liquidity, easy to exit if needs change before maturity.

 

[old goat]

send it to me and I promise / guaranty a 10% return in 2.5 years
PM me for my address ( postal MO , cashier check accepted . OH and PP F&F only .
I treat you right .

 

[Area51BS]

Could also do a series I bond. Max 10k, but you make some good money on it.
https://www.treasurydirect.gov/savings-bonds/i-bonds/

 

[joeb]

I appreciate all feedback.

Gives me some things to consider.

I Thank you all !

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