WdnUlik2no

I owe $22,000 on my TL. I am throwing around the idea of paying it off now. Not to get into specifics about my income. When I bought the TL back in Nov 04, I was making 62% less then I do right now at my new job that I took in September of 05. That extra money has just been accumulating because I have nothing I want or need to spend it. I have way more than the enough to pay it off now.

I don't have any credit card bills and other than my mortgage, the only other loan I have is my student loan which is moderately less than what I owe on the TL. I thought about paying off the student loan, but since I get tax dedecutions on the interest, I am considering paying off the car instead.

Usually at this time, I get tired of a car and end up trading it in for something new. But the TL is really the first car that I am considering keeping for the long term. My other car is a 98 and its completely paid off, and because of that, I'll never get rid of it until it dies completely.

Is paying the acura off a good idea? Or would you suggest continuing to make payments as usual until I am done in 2009?

Adamo0926

My suggestion is to keep that money accumulating while you can and invest it wisely. Since you are young you could even invest some in more speculative ventures. My guess is that you would get a return that would be significantly greater than any interest you are paying on a car loan. However, if that is not the case and you have a high interest car loan that would cancel out or exceed your investment returns, then by all means pay off the 22,000.00 loan.

maluskills

I would say pay it off, and then use whatever extra money to invest, you never know what will happen tomw with your job, so better to use the money now and not have another 3yrs of car loans on your head.
Keep paying your mortgage and school loans back, add a little extra to your payments even to help reduce some of the interest, you'd be surpised at how the life of the loan decreases by just adding $50 or $100 extra a month...

G

It all depends on what interest rate you have on the loan for the car. If you have a low interest rate, something in the neighborhood of 4%, then take that $22k and invest it. You will make another 3-4% while making your regular payments.

Now, if you have a crazy high interest rate, then by all means, pay that sucker off.

WdnUlik2no

its 4.09% So I guess I better start getting serious about investing.

I understand what you guys are saying about how investing makes more sense, I am just terrified of putting my money into something thats not guaranteed after hearing all these horror stories of people losing their life savings in the stock market.

The only investments I have right now is my 401k and a Roth IRA, rest of my money is split between a checking and money market account. They make a little interest. But its not really that good.

masterbyte

Both your IRA and 401K are investments in the market. I say pay it off. I paid cash the day I bought my 04 TL and I just take the $$ I would be paying every month and invest it. Look at a Fidelity fund - some have made 18% in the past year, averaging 13% over 5 years, and since its a mutual fund you are much safer.

Make 13% - 18% on your money versus paying 4.09% (which is a great rate) interest.

my .02

Masterbyte

bar2v

4.09% is pretty low and you could make more by investing the money but you also need to evaluate it in terms of risk. paying off your car is a 100% guaranteed 4.09% percent return on your money while the stock market is a 100% NON-guaranteed return on your investment of 8-9% on average. Personally, I would recommend splitting it down the middle 50/50: 1-2g in the market, 1-2g into the car, every month until you pay it off. anyways that's what I am doing, but you dont have to listen to me. afterall I am just some guy on the internet.

RSA_Secure

Even if you dont feel like investing, open an account with INGDirect. They have 4.25% APY...so you will make more money than the interest you pay.

Adamo0926

Another strategy.....take the 22,000.00 and head to the casino.....lol

Wid-TL

Good discussions here!

If you decide to invest the money, instead of maintaining your current car loan, why not take out a home equity loan to pay off the car, then you can write off that interest as well?

Sounds like you're doing pretty good for yourself financially, and reducing that AGI at the end of the year by writing off as much interest as possible is always a good thing! Not sure what the current rates are now though...

CL Platano

I'd pay it off..

maluskills

And that 4.25% you make will be taxed down to about 2.5 or 3%

kennyc

pay it off... then invest the remaining money.

your_mom

Spend the money on strippers and beer.

MR1

Take the sure thing first. Looks like the extra cash will continue to come, invest that after getting rid of a bill.

It's really nice not having a car note note.

gurneyeagle

One of the most intelligent posts ever made! Follow it.

gurney

acuintegra

I say pay it off and get that monkey off your back. It's not like the loan is a tax write off. Pay the car loan off and start investing the money you will be saving NOT having to pay for the loan.

Adobeman

1) Max out on your yearly contributions to your 401K and Roth, then
2) make sure you have 4-6 months of liquid cash in case your good situation fails.
3) Then do a pay-off vs. invest analysis. Whichever one "wins" is the right one. If you are not wanting to invest then just pay it off if you have the cash. 4.99 is much higher than you will get if you just park it in a bank account.

Vtech

Remember dropping so much cash on a car makes for worst investment unless you want to keep you car forever. On the other hand if you end up spending more on that loan overtime it makes sense to pay it off now and not worry about it cause its your car and can do whatever you want to it, that is if you are financially secure. It helps that TL's resale value is pretty good, too, if you decide to sell it later. Having said that CitiBank now offers 4.75% E-savings acount which you can link to your existing Citi checking or other bank acounts. No minimum deposit. Check other saving account rates at bankrate.com Whatever ever you do, don't rush it, make a wise decision according to you situation

kennyc

kinda off topic... But I just wanna point it out...

Vtec is a system developed by Honda

Vtech makes crappy cordless phones.

XtraKrispy

Take $10K and enter the WSOP. Take $5 K and put it towards your car. Take the extra $7K and invest it.

Nandito28

Pay it off. you'll be debt free (If the car is your only debt)

jupitersolo

Here's a few thoughts...

If you have a low interest rate, don't pay it off. Invest your money for a higher return.

Why not double up on your payments? You'll pay it off quicker with still having money to invest.

My wife was happy as hell when we paid off her 99 CRV (4yrs) she loves the fact of no car payments. And is wanting to drive it until it falls aparts 2010 or 2012.

I paid off my 2002 Altima last summer, then turned around and paid cash for my 06 TL. There's nothing like having the title in your hands and not paying the bank monthly.

RickRoush03

invest the cash unless your interest rate is over 10% a year on the car, have the money working for you. paying off the car is only going to depreciate more. find a good investor and have your money in a roth ira

LuvMyTSX

LOL, I was just going to suggest that. I opened my account in December and love the interest I'm getting compared to my stupid Bank of America account, which was only 0.6%. I also opened a 12-month CD at 5.25%. www.ingdirect.com

C The "S"

With any investments you still have to take into consideration taxes. But why tie up all that cash in a depreciating asset. You would be better off investing the money. A few things to consider, make sure you have enough cash reserve, some have mentioned you never know what may happen tomorrow and this is what the cash reserve is for. Someone also mentioned a roth, but your income may be too high and you may not be able to contribute to it. Remember with investing that diversification is key, I would look into some of the new funds available that are built according to a particular asset allocation model. If you are young you can be more aggressive.

missmyprelude

I second the idea of maxing out your 401K (up to $15,000 this year) and Roth ($5000/yr, I think).

I'm surprised that no one asked you about your mortgage? I'm guessing that is higher than the 4.x% you're paying on your car. And I'd guess maybe a 30 year?

I'd keep the car payments, and start putting a few hundred per month toward your mortgage principal, and maybe paying down your school loans too. That way, you can pay off that higher (assuming) rate mortgage in a shorter period.

Then, I'd start doing some long term investing. The stock market is not risky if you plan to stay in for a while and you deversify properly. Take a look at good "no load" funds from Fidelity, Vanguard, etc. Just don't lose your shirt on fees!

And, as others have suggested, put a few thousand into a high yield savings account - they are getting better than 4% these days. Even CDs are 5% or more, but you'd have to make sure that is money that you won't touch for 6 months to a year.

You are in an enviable place. It sounds like you have your head screwed on straight, so you can really make your life comfortable for yourself. Start trickling that extra money into wise investments, and you'll never miss it. Setup automatic deposits so you never see the money. Out of sight, out of mind.

Good luck on whatever you decide.

C The "S"

Missmyprelude, good advice. But I look at a home as an investment and a stepping stone, so why pay it off, now if its your last house you'll own then go for it pay it off.

P.s. there are a lot of variables here and many assumptions that need to be made to give proper advice.

PsychFish

best idea evR My off my car!!!

LacViet

This is the best advice I seen yet! Wise word!

leedogg

Buy a larger/nicer house. Its the single possible investment you expect double digit percentage growth on. You could buy multiple TL's with your profit...

wthiwwt

There are a couple of things you are neglecting to consider in the above advice.

1) Mortgage interest is deductable, so a 4.x% auto loan and a higher mortgage interest rate (assume 6.x% at today's rates) is not an apples to apples comparison. In fact a 6.x% mortgage interest rate more than likely costs you less interest than a non deductable 4.x% auto loan (which is not tax deductable) depending on your federal tax bracket and state income tax rate.

2) Interest income is taxable, so the effective yield on a 5%+ CD is reduced by a couple of percentage points and is most likely going to earn you less than the 4.x% you are paying in interest.

Russdaddy

Pay the car off! Why pay interest on something unless you have to?

P.S. Increase your payments on the house.

C The "S"

There has been a lot of good advice here, But this is ultimately your decision, do what is comfortable to you. You've heard the pros and cons of doing a number of things.

wthiwwt: You state a very good point the most people tend to forget about. Taxes!

WdnUlik2no

Thanks guys for all your great advice its good to see all the comments were not one sided and showed the pros and cons of doing either. My mortgage is 5.75% fixed @30 years and I never even thought of the possibility of paying that down. I pay around $6800 in mortgage interest every year and that is real helpful when I itermize my deductions.

The only thing that stops me from maxing out my 401k is that I can't. The company I work for now is paying my S-Corp. So I am not a W2 employee. The 401k that I mentioned earlier basically a rollover from my past jobs into a single rollover IRA account at fidelity, so basically I can't touch it. I can't even add money to it because fidelity told me that I can't co-mingle non-taxed and taxed money. But since the money my corporation gets paid is not taxed either, can't I put some of that in my rollover IRA?

Currently the only thing I can max out right now is my Roth IRA which is currently only $4000/year.

When I paid off my other car, it was a very good feeling. While I haven't made a final decision about whether or not if I will pay the Acura off or not, one point I got from nearly all of yall was the fact that I should be investing my money instead of having most of it sit in a low interest checking and money market account. My checking account gets .35% interest and my money market gets 2.81%. It seems other places offer much better interest rates. I am still throwing around the idea of paying the car off, but in the meantime I suppose I'll start doing things to make my money work harder for me no matter what I end up doing about the car.

Thanks again!

aw1

I would pay half of the car off. Save the rest for investments and for emergency fund. Never know, things happen. One day you are working, next day you get laid off!!