Should I settle my car now?

thestaggy

thestaggy

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I've got 13 months left on my car installments and it amounts to R21,000-and-some-change.

I have the spare cash to pay it off with immediate effect.

Invest the spare cash or pay the car off and start investing/saving what I was spending on installments?
 
No interest saving when you're that close to settling. If you have the discipline to invest the money best invest otherwise settle the debt. It's ever a good feeling settling
 
If it was me, pay it off and start investing the instalments.

I've had my car for 2 and a half years, 2 and half years remaining on the original loan, going to settle it in the next 2 months, and then invest the savings on instalments
 
supersunbird said:
If it was me, pay it off and start investing the instalments.

I've had my car for 2 and a half years, 2 and half years remaining on the original loan, going to settle it in the next 2 months, and then invest the savings on instalments
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That would make sense, yes, but in his case, he won't save much so not worth it. Rather get what he can on interest on investing the money he has available and add the installments once the car is paid off.
 
I would also pay it off and invest the installment. you are still paying interest on the amount owed,

at worst you have more flexibility with your finances since you are not bound by a monthly outflow.
 
Method said:
That would make sense, yes, but in his case, he won't save much so not worth it. Rather get what he can on interest on investing the money he has available and add the installments once the car is paid off.
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what do you mean he wont save much?

Edit. I know he is paying off more capital in the last few installments, but surely his net return will be lower due to the interest being paid on the car :confused:
 
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bro-da said:
what do you mean he wont save much?

Edit. I know he is paying off more capital in the last few installments, but surely his net return will be lower due to the interest being paid on the car :confused:
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Won't save much in terms of the interest paid.

If your principal debt is R20,000 but your contract debt is R21,000, then you "save" R1000 by settling. You're better off putting the R21,000 in an investment, you'll probably make more then that in 12 months. You have to do the maths to see if this is the case.
 
The_MAC said:
Won't save much in terms of the interest paid.

If your principal debt is R20,000 but your contract debt is R21,000, then you "save" R1000 by settling. You're better off putting the R21,000 in an investment, you'll probably make more then that in 12 months. You have to do the maths to see if this is the case.
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I see what you are saying. But i think it's very close to a zero sum game that way. At best you make a couple bucks, at worst your investment (depending on what it is) does bad an you lose a few bucks (net so its not that serious).

I would pay off and invest as much as i can like sunbird said. It has the added benefit of almost certainly having a respectable return and flexibility in your budget, provided you manage your new freed up cashflow well. a few extra grand can make a good whiskey tempting indeed.... :D
 
bro-da said:
I would pay off and invest as much as i can like sunbird said. It has the added benefit of almost certainly having a respectable return and flexibility in your budget, provided you manage your new freed up cashflow well. a few extra grand can make a good whiskey tempting indeed.... :D
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That is the mistake that most people make. The money is now free, and after the 2nd or 3rd month that just goes towards more dinners and take outs and other stuff.
 
supersunbird said:
If it was me, pay it off and start investing the instalments.

I've had my car for 2 and a half years, 2 and half years remaining on the original loan, going to settle it in the next 2 months, and then invest the savings on instalments
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Listen to sunbird... It speaks the truth.
 
whatwhat said:
That is the mistake that most people make. The money is now free, and after the 2nd or 3rd month that just goes towards more dinners and take outs and other stuff.
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My advice as well.

As soon as you settle, you'll be so excited by the extra few thousand that the investment takes a back seat, "just for a few months until we find our feet, or go on that holiday"
 
Pho3nix said:
Is that the settlement amount or your own maths?
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Estimated settlement amount when I log in to my account is R21,829. Contract balance is 23,386.17.

It does indeed seem as if interest savings will be negligible, but I'm also weighing up financial freedom. My plan was to always carry on like I never had that money once I paid it off, but loosening an extra noose around ones neck will be a nice feeling.
 
thestaggy said:
Estimated settlement amount when I log in to my account is R21,829. Contract balance is 23,386.17.

It does indeed seem as if interest savings will be negligible, but I'm also weighing up financial freedom. My plan was to always carry on like I never had that money once I paid it off, but loosening an extra noose around ones neck will be a nice feeling.
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Pay it off and be done with it. You'll save R1,500 now and have additional every month to invest. At the end of the day unless your investment return is significant, you're just counting pennies.
 
It's not often that you have R21k available so think carefully how it is used. Do you have any other debt that can rather be settled at a higher rate, eg.your CC or account at Edgars? Or pay cash for some home improvements?

Also be sure you have the discipline to actually save the monthly "savings" somewhere. Either way a nice position to be in!
 
The_MAC said:
Won't save much in terms of the interest paid.

If your principal debt is R20,000 but your contract debt is R21,000, then you "save" R1000 by settling. You're better off putting the R21,000 in an investment, you'll probably make more then that in 12 months. You have to do the maths to see if this is the case.
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That :D
 
If you have a bond...pay it off and put the installment money into the bond from the very first month it's free.

Don't invest while you can save interest off your bond,unless the investment makes more, money than the interest you save.
 
thestaggy said:
I've got 13 months left on my car installments and it amounts to R21,000-and-some-change.

I have the spare cash to pay it off with immediate effect.

Invest the spare cash or pay the car off and start investing/saving what I was spending on installments?
Click to expand...

Pay off your car.Less debt means less stress. I can almost guarantee you that if you invest the funds, your return on investment will be much lower than the interest percentage you are paying on the car. You should do a calculation though to confirm this.
 
SauRoNZA said:
If you have a bond...pay it off and put the installment money into the bond from the very first month it's free.

Don't invest while you can save interest off your bond,unless the investment makes more, money than the interest you save.
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Exactly what I've been doing for the past 2 years. Begrudgingly, when the poop hits the fan I'll dip into rainy day fund and a portion of the (extra) instalment to cover the unexpected expenses.

But then again, I'm in a position where I have additional funds and resources to invest in. Not sure what I'd do if I didn't.
 
It all depends on the interest rates. In general, pay off your highest interest rate debt first. If you have CC debt, pay that, if your car is on 14.5% and your house on 10%, pay the car off. If your car is on an interest free loan, then invest it.

Most likely your car is on mid double digit interest, in which case yes, pay it off, then start investing after that.
 
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