Pay off loan or supercharge

[moto111]

It's both they look at overall credit/debt and each card

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[Lowrider]

The thing is that 5-6 years is long time with car payments and there is a chance you will want to trade it in for another next big thing in 5 years.

So even a 7K additional payment towards the loan might at most reduce your loan term by 12 months.

Personally I would not spend $7K on a supercharger alone for a daily driver that will most likely never see a drag strip.

Hence, I would put that money into a savings for emergencies or pay off other CCs. Or put that on a house down payment if you do not have one.

 

[emanon]

I guarantee that over 95% of people have there mustangs financed lol I will not wait 7 years to buy something I want . Espically when I could go to work and not come back any day why would I wait .

But like I said the novelty of a blower wears off shortly after install unless your a hardcore racer.

This is a common fallacy, aka argumentum ad antiquitatem, just because it's common and tradition makes it correct. Fact is financing something which will be 80% depreciated by the time it's paid for is a fairly recent phenomenon, death by a thousand papercuts, getting people to buy crap they can't really afford.

 

[Chameleon]

Wait on the SC. Pay it off while getting other mods in the meantime.

 

[emanon]

One thing I don't get is all the people posting about the bank calling about modding their car. How is this any different than having a mortgage and people bettering their homes by altering it? Does the bank care that you "modded" your home? No they don't. They don't care that you have done anything to the car. I have done this when I was younger and never once had any kind of an issue with a bank over modifying. I think it is an invalid paranoia about banks. If anybody has any personal situations they got in doing this I would love to hear it.

It's not meant to be taken literally, it's more a question of why you're throwing money at a depreciating asset that isn't yet paid for. And even then, the return on money spent for aftermarket parts is purely crap, so everything you're adding amounts to pennies of added value. I'm not against modifying cars, actually quite enjoy it, but it when you're in the financial place to do it and not worry about it. If you still have 6 years of payments on a $40k car, the last thing you should be doing is shoveling money at shiny bits.

Houses/property are an entirely different subject matter and completely apples to oranges. Adding a new kitchen to your house will increase the value tremendously, and generally the house will increase in value over time doing almost nothing to it (economic issues aside).

 

[Strokerswild]

^^^ Yes, 100%.

In the case of the OP, I'd personally pay it off, but mainly because I dislike anyone but me holding the pink slip to anything. I'd love to supercharge mine, but it ain't happening until it's truly mine.

 

[DrDing.Muscle]

Houses/property are an entirely different subject matter and completely apples to oranges. Adding a new kitchen to your house will increase the value tremendously, and generally the house will increase in value over time doing almost nothing to it (economic issues aside).

Tell this to the people that bought houses before the 2008 house market crash. Most of them lost their asses on their houses even if they did something to improve the value of it. My point is nothing is guarantee when it comes to trying to raise the value of something. Anything can plummet and depreciate greatly at any time so you might as well enjoy it.

 

[emanon]

Tell this to the people that bought houses before the 2008 house market crash. Most of them lost their asses on their houses even if they did something to improve the value of it. My point is nothing is guarantee when it comes to trying to raise the value of something. Anything can plummet and depreciate greatly at any time so you might as well enjoy it.

I was hoping someone would say that.

You know who lost the most money, the people who bought houses with little to no down payment that they couldn't afford in the first place. The people who were reasonable kept their homes, and their values are (at least in my area) above where they were in 2007-2008. People who borrowed $400k paying only the interest when they were making $45k/yr shouldn't have been in that position in the first place.

If you look at 5-15 year blocks over the past 50 years, buying a home is a fantastic investment. Buying a sub 6 figure car and reviewing the value 5, 10, or 15 years later is throwing money into a wood chipper.

You know who enjoys things the most, people who own it and don't have a single worry that something bad happening jeopardizes their ownership experience.

The people who are REALLY ahead, are the ones who didn't finance their brains out in 2006-2008. And when the housing market s*** the bed, they bought everything they could in 2009-2012. :first: How many people looking back, wish they hadn't spent all their money financing a car, and instead bought a house for 50% of what would be it's current value?

"Luck" is being prepared to take advantage of opportunities when they present themselves. You don't need a crystal ball, just wait and things present themselves. Do that a couple times and you can write a check for the car with someone elses money.

 

[Mike00]

I was hoping someone would say that.

You know who lost the most money, the people who bought houses with little to no down payment that they couldn't afford in the first place. The people who were reasonable kept their homes, and their values are (at least in my area) above where they were in 2007-2008. People who borrowed $400k paying only the interest when they were making $45k/yr shouldn't have been in that position in the first place.

If you look at 5-15 year blocks over the past 50 years, buying a home is a fantastic investment. Buying a sub 6 figure car and reviewing the value 5, 10, or 15 years later is throwing money into a wood chipper.

You know who enjoys things the most, people who own it and don't have a single worry that something bad happening jeopardizes their ownership experience.

The people who are REALLY ahead, are the ones who didn't finance their brains out in 2006-2008. And when the housing market s*** the bed, they bought everything they could in 2009-2012. :first: How many people looking back, wish they hadn't spent all their money financing a car, and instead bought a house for 50% of what would be it's current value?

"Luck" is being prepared to take advantage of opportunities when they present themselves. You don't need a crystal ball, just wait and things present themselves. Do that a couple times and you can write a check for the car with someone elses money.

This isn't entirely true. Cali has recovered but a lot of that had to do with the local economy improving in 2010ish. So houses went up.

Florida, Vegas and parts of the Northeast are getting back to even. If they had a bad loan it was worse.

That said I invest in real estate myself at 26 (31 now) and learned it from my father who himself has more then just a few properties. It's absolutely worth the investment but many areas have not fully recovered from the drop in 08. Real estate is very much area specific.

That said on a loan less than 2% for a 40k car.... lets just say it hardly matters to pay it off. So make the decision you are most comfortable with.

 

[CM581978]

^ but what if you want to pay off the car to reduce your monthly expenses?

 

[Mike00]

^ but what if you want to pay off the car to reduce your monthly expenses?

My assumption is that he isn't struggling to pay his bills so the monthly expense is probably not critical. There's certainly nothing wrong with paying it off but the fact of the matter is the money could be invested and make a better ROI.

But yes if he wants to reduce his monthyl expenses go right ahead. The interest is negligible though.

 

[emanon]

To all the people proposing to invest rather than pay off the depreciating asset. What is the proposed rate of return on $30k cash? What is your net profit year over year vs interest paid? And how risky is the investment vehicle and how much of your time does it consume?

To all of you suggesting this, would you take out a second mortgage on your house or borrow against a paid off car to invest in the stock market? (Or w/e investment you're suggesting)

 

[ECM90]

^ his interest rate is only 1.9% he can easily find a fairly low risk investment that trumps that. He will earn more money not paying off. Some fairly safe mutual funds earn around 7%, he would have 42 grand after 5 years so $12,000.

Compared to only "saving" $1,200 in interest paid on his loan after 5 years, if he were to pay it off today and not have any liquid capital.

So investing, and not paying off, he would have $12,000 -$1200 he is paying in interest on his loan. Still at least 10 more grand than if he were to pay it off today.

And please don't tell me 7% is unrealistic. I've been in mutual fund for 20 years that has been average 12%. So 7% is conservative. The mutual fund is NICSX if you care to look it up, but there are many more.

The average 5 year annual rate for NICSX has been 18.41% for each year from 2010 to now. So in this scenario he would be at $70,000 on a 30k investment in just 5 years. Over $160,000 in 10 years.

 

[emanon]

^ his interest rate is only 1.9% he can easily find a fairly low risk investment that trumps that. He will earn more money not paying off. Some fairly safe mutual funds earn around 7%, he would have 42 grand after 5 years so $12,000.

Compared to only "saving" $1,200 in interest paid on his loan after 5 years, if he were to pay it off today and not have any liquid capital.

So investing, and not paying off, he would have $12,000 -$1200 he is paying in interest on his loan. Still at least 10 more grand than if he were to pay it off today.

And please don't tell me 7% is unrealistic. I've been in mutual fund for 20 years that has been average 12%. So 7% is conservative. The mutual fund is NICSX if you care to look it up, but there are many more.

The average 5 year annual rate for NICSX has been 18.41% for each year from 2010 to now. So in this scenario he would be at $70,000 on a 30k investment in just 5 years. Over $160,000 in 10 years.

That fund does very well, but YTD it's under 2% so he would be upside down on that with a lot more risk than reward, and that's assuming he had the full nut to invest vs. the payoff.

That is my point, there is possible upside but A LOT of risk of downside as well and I don't bet with borrowed money.

If you're consistently pulling 18% you should be driving a lambo not a 4cyl mustang.

My simple question is always, would you take out a loan to invest the markets? I have yet to hear anyone say yes to that.

 

[ECM90]

YTD on the surface is lower. The fund pays out capital gains and dividends. So the "stock price" is -2% YTD. But having dividends and capital gains set to reinvest you have more shares then what you started with at the beginning of the year. So yes it's at a lower price but you're still in the black. With 30 grand he would of had $780 pay out in June set to reinvest he would have 11.2 more shares then what he started with.

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