Vehicle Finance Question

Azbubu

Azbubu

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eeek, my first time in here.

Would it be better to pay off your car from your savings and then save the monthly installments to your savings or rather keep paying the monthly installments and leave your savings alone?
 
Pay it off.

Generally interest paid on debt is higher than interest gained on the savings side, so you need to kill the debt asap.
 
Yep, what Havoc said. Especially if its open access debt like a homeloan as then you can park any spare cash into the debt saving you tons of interest while still having access to the money in the event of an emergency. With vehicle finance I am not sure if the money is that accessible though. In that case keep some back as a reserve for if you need cash in an emergency but also try to pay off the debt faster with additional payments.
 
Your finance interest rate is generally higher than your savings rate. So it would be better pay the vehicle finance.
 
abzo said:
Thanks. And there will be no penalties for paying it off?
Click to expand...

Depends on the size and age of the loan. If it falls under NCA and was over 250k, then it's a "large" agreement and 3 months' notice may be required.
 
ask for a settlement figure and pay on the date indicated that the settlement is valid till. you will be charged the interest up to that date anyway.
most people are in such a hurry to settle and buy a new car they end up paying this settlement immediately, thus paying a penalty equal to the interest of the settlement period
 
I would assume that this applies to all banks, but interest on the loan is on a month-to-month basis, so the cutting your term by a year saves you thousands. Essentially, the more you pay every month, the smaller the loan gets, and the less interest you end up paying.

Depending on your financial situation and the term of the loan, in the last year you can just settle the remainder of the loan. Prior to this, you should try and increase your monthly payments/reduce the term where possible.
 
Compare the interest rates, some cars have very low interest rate loans due to specials etc. I just purchased a bmw 3 series and they gave me 3.5% interest rate, so in my case it would be better to keep that loan as long as possibly since you can earn much more interest from a savings account.
 
brianj74 said:
ask for a settlement figure and pay on the date indicated that the settlement is valid till. you will be charged the interest up to that date anyway.
most people are in such a hurry to settle and buy a new car they end up paying this settlement immediately, thus paying a penalty equal to the interest of the settlement period
Click to expand...
Easily avoided, just pay everything, but some tiny amount.

BrokenLink said:
Compare the interest rates, some cars have very low interest rate loans due to specials etc. I just purchased a bmw 3 series and they gave me 3.5% interest rate, so in my case it would be better to keep that loan as long as possibly since you can earn much more interest from a savings account.
Click to expand...
Those usually come with some sort of catch, but not one where paying it off early will help.
 
Defnitely look out for penalties for completely paying it off too early. My Bond has that. I need to give 6 months notice or something before closing it down. Hence I will almost pay it off and let them take a debit order each month as per usual but I will just remove that debit order again each month until I want the bond to finish. I can time it but obviously have to decide 6 months in advance when I want it to end.
 
Noob question

Let's say you financed 120K at 13%

Would the amount be 120K + 120k(0.13)?
Or is it not simple interest.
:o
 
no.

each month interest would accrue against your account at a rate of outstandingbalance*13% /12
 
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