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Pay off the car or... not?

September 5th, 2014 at 03:25 am

So few days ago I've decided to work on paying of the car.

My logic was - market is high right now, maybe it is best to first work on paying off the car, than afterwards, dollar cost average freed up money into SP500, and to designate that savings towards the "pipe dream challenge".

But, since seeing Creditcardfree's post I looked up the Navy Federal special offer of 5% CD (for maximum of $5,000).
Now, while it is not much, it is an awesome rate for a CD, which is guaranteed.

So the logical part of me does struggle with it -- the interest on the car loan is 2%. The interest on a CD is 5%. And it is guaranteed and risk free. So even after taxes, mathematically I would come ahead. So how can I justify paying off the car?

Posted in Uncategorized | 5 Comments »

5 Responses to “Pay off the car or... not?”

  1. LuckyRobin Says:
    September 5th, 2014 at 04:20 am 1409890830
    1409890830

    Don't you have to have a family member in the military to qualify for that?

  2. Nika Says:
    September 5th, 2014 at 05:03 am 1409893401
    1409893401

    We have an account with them already. Ironically, that car loan. Embarrassment

  3. creditcardfree Says:
    September 5th, 2014 at 11:50 am 1409917839
    1409917839

    I see your dilemma. Can you do both? That would be the best answer. Smile
    The best justification for paying off the car is psychological. The feeling of being free from the debt, the payments and driving a car that is paid for.

    Since you would keep making payments on the car if you invest in the CD, when would the car end up being paid off? Is it still within the next year? Could you invest in the CD now, and still look for areas to cut and apply the 'savings' to the car loan?

    Good luck deciding!!

  4. My English Castle Says:
    September 5th, 2014 at 12:38 pm 1409920706
    1409920706

    If it's a matter of small change, I'd pay off the car to avoid having to think about it.

  5. MonkeyMama Says:
    September 5th, 2014 at 01:43 pm 1409924623
    1409924623

    Personally I would do the 5% CD and keep the car loan. If I seem extraordinarily anti-debt these days it's because interest rates suck. I would take a 0% - 2% loan while earning 5% or 6% FDIC insured, guaranteed interest. I have done just that in the past.

    I would do the 5% CD too, but I already opened 3 bank accounts this year for bonuses and it's a lot to manage (& I have a 6% CD already).

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