Pay car off/save for DP?

[MrsDarcy]

My husband has a car that we’re currently paying on, and are paying at least double to pay it off by mid next year. The car isn’t proving to jive well with his hobbies and volunteer work, so we’re thinking about selling it either later this year or early next year and replace it with a small truck. Interest rate on the car is 2.49%. I’m not worried about gaining any interest in a savings account instead, but do you think it would be more advantageous to pay down the car loan quicker or pay it off normally and save for a larger down payment?

[melmel48]

I am in the same predicament.. sort of. My car is perfectly fine for my needs. I had a small transmission leak, which I got repaired. If it happens again, I want to get rid of the car as I refuse to deal with transmission problems. I don't know if I should pay as much as I can towards the loan or save for a down payment.

I decided to split the payments  between paying extra on the car and a down payment,for now, although a friend encouraged me to save for the down payment. It is a lot to think about!

If you pay it down; but not completely off, will you be able to get more for it than you owe? That is what I am nervous about; being upside down on the loan.

[MrsDarcy]

Apr 26, 2021 8:42:38 GMT -5 melmel48 said:

I am in the same predicament.. sort of. My car is perfectly fine for my needs. I had a small transmission leak, which I got repaired. If it happens again, I want to get rid of the car as I refuse to deal with transmission problems. I don't know if I should pay as much as I can towards the loan or save for a down payment.

I decided to split the payments  between paying extra on the car and a down payment,for now, although a friend encouraged me to save for the down payment. It is a lot to think about!

If you pay it down; but not completely off, will you be able to get more for it than you owe? That is what I am nervous about; being upside down on the loan.

We won’t be upside down on the loan no matter what we do, thankfully. I guess it doesn’t really matter which we do, just didn’t know it it was smarter to come to the new loan table with a larger DP.

[sdlaura]

SS- refinance the interest rate (or at least get quotes), and then save the down payment. My last used car interest rate was 0.75%, and that was when rates were higher than now, so I'd see if you can get lower and then save the money.

[ohgillian]

I didn't know you an re-fi car loans, so that's interesting. If that's not an option, I personally would pay the car off as quickly as possible, then save for the DP. It just seems more straightforward to me. But I don't know that it matters, really.

[aspentosh]

Since you won't be upside down on the loan, I think you could really go either way. That's a pretty low interest rate and you'll likely make more money with interest if you have it in savings. I know you said you didn't care about that, but it could play into things if you're hoping to save $10k+ for the down payment. I'd probably split it, unless it's less than $5k left in the loan. Then I may continue overpaying.

[MrsDarcy]

Apr 26, 2021 13:45:26 GMT -5 sdlaura said:

SS- refinance the interest rate (or at least get quotes), and then save the down payment. My last used car interest rate was 0.75%, and that was when rates were higher than now, so I'd see if you can get lower and then save the money.

I did just refinance (for a better interest rate, same term). 2.49% is the best I could find. I’ve never seen one as low as .75%. (ETA- for a used car)