Advice : pay off car?

[Dolby]

I have extra money to pay off my car (about R100,000.00 left), which would save me R2300.00 premium per month.

I wanted do this 7 months ago, but was advised to put the extra money I had into shares (as they were low) and pay off the car as planned. That paid off, as my shares have increased in the time.

However - I now want to pay off the car to save those premiums, and put the extra R2300.00 into property.

Is that wise? Some people have said I should still rather keep the money in shares and not 'invest' in a car. I tend to disagree, providing I use it only for the property.

 

[BCO]

I have extra money to pay off my car (about R100,000.00 left), which would save me R2300.00 premium per month.

I wanted do this 7 months ago, but was advised to put the extra money I had into shares (as they were low) and pay off the car as planned. That paid off, as my shares have increased in the time.

However - I now want to pay off the car to save those premiums, and put the extra R2300.00 into property.

Is that wise? Some people have said I should still rather keep the money in shares and not 'invest' in a car. I tend to disagree, providing I use it only for the property.

My 2c is pay off the car first.

 

[xrapidx]

Are your shares returning more than the interest rate charged on the car?

 

[DJ...]

Depends what shares, but I'm not prepared to go out on a limb and say yay or nay on whether the share prices will outperform the interest on the car. Personally, I'd pay off the car - get rid of the debt. Think of your overall financial status as one big P&L account. You're investing and making returns on the equity investment, but then cannibalising this with interest being paid on your car. Doesn't matter where the money comes from - it's all one big income and expense stream. Now with the car paid off, you could take that R2300-00 per month and invest in the equities market (via a fund probably) without eating away at your returns...

 

[blaaislaai]

Settle debts first

 

[Geriatrix]

The amount you save by killing debt will be more than the amount you earn by investing the same money.

 

[blunomore]

Settling debt is a form of saving. Or so I am told.

 

[DJ...]

The amount you save by killing debt will be more than the amount you earn by investing the same money.

Not always the case - depends if you reinvest. But yes, killing the debt should be the way to go for 99% of people...

 

[JK8]

Audi S3!

 

[Nerfherder]

Kill the debt... the 100k on your car will cost you up to 140k depending on the duration of the loan.

Re-invest the R23000 that you would have been spending on your car and you will get your money back.

 

[Geriatrix]

Not always the case - depends if you reinvest. But yes, killing the debt should be the way to go for 99% of people...

I agree but someone who asks financial advice on a forum would be part of the 99% you mentioned.

 

[Jan41]

Shares grow in value, cars however lose their value.

I'd look at the total you still have to pay for your car.
premiums times months left.

Then calculate the growth rate on your shares, this will only be an estimate.

I'd kill to have that kind of capital lying around in times like these.

You have to take risks in life, but this is pretty much textbook...

jan uit!

 

[RazedInBlack]

Pay off the car dude. You'll feel better.

 

[MisterBigglesworth]

Dude...Im busy trying to pay off debt...dont care if x says rather invest in y, and carry on paying car off as per norm. I HATE having debt over my head...if I could..would pay my car off one shot if I had the cash...no need to think about that one. I cant wait till my car is paid off...year and a half to go!!

 

[killadoob]

Yup get rid of the debt i reckon, nothing nicer than knowing your car is payed off.

 

[Beginner]

Pay off the car!

 

[Amida]

What about people like Branson that was in millions of debt for the most part of his life.

If you have job security and can afford the R2300 a month why not take a risk?

 

[DJ...]

I agree but someone who asks financial advice on a forum would be part of the 99% you mentioned.

LOL - very true...

However I give Dolby a little more credit than some of the inebriates infesting this place at the moment...

 

[Dolby]

LOL - very true...

However I give Dolby a little more credit than some of the inebriates infesting this place at the moment...

hehe ...

The reason I asked is becauses there are two views on it : one camp says 'pay off all debt as fast as possible', and the other camp says 'it depends - leave certain debt'

In all honesty, it seems the more experienced people in finance (also wealthier people) seem to be the second group while the general population seem to be in the first.

For example, I had quite a bit of debt (various) and received enough money to clear them all out 8 months ago. However I was advised to pay off only the short/high interest debt only - which is why I currently have my car.

The same camp also say a vehicle residual depends on the individual and it's not a straight out 'no' as most say.

 

[Gaz{M}]

It's a snowball effect.

Pay off your credit card, which frees up the monthly credit card installment.
Then pay off your car, which frees up the monthly car installment.
Then pay off your bond.

The reason to pay off short term debt, high interest first, is to free up the installments for longer term debt.

It is amazing how much money you can save if you pay off your bond in less than 20 years. Just R500 a month extra can save you R100 000's in the long term. Can shares really grow that much (guarranteed) over the same period?