LPT: Keep making that car payment after it's paid off.

  1. This is great advice, my wife paid off her 2014 civic in 2019, kept making the payments, in another 2 years she'll just be able to straight up buy another civic

  2. But probably shouldn’t, let that shit grow for another 10 years. I like the idea of putting it into a taxable brokerage index fund and letting growth buy me a new car every 10 years

  3. But you can usually get a loan with a lower interest rate than investing the money, so it's actually cheaper to get the loan. If you pay cash the money is gone.

  4. With cash! And with that power you can negotiate with the dealer way better. “I’m buying this car in cash today for X amount or I’m going to another dealership”

  5. Hijacking the top comment to say that YNAB is a great tool for this kind of thinking. It was a game changer for me and my only regret is not having it when I was younger. Never worry about bills or credit card payments anymore.

  6. Look into the settings in your online banking, if you're like me and bad at intentionally saving. I can set up automatic money transfers so that whenever I spend at somewhere classified as a coffee shop, an extra 3% of the bill gets withdrawn from Chequing to Savings, or automatically transfers the extra to savings when the balance in chequing exceeds $x,000. Or do like LPT and setup a monthly 'payment' to yourself, too.

  7. When i was done paying off vehicles, i made auto transfers for the vehicles payments to go to savings. I also have something similar set up where $1 gets transfered from checkings to savings every single time i pay with my debit card.

  8. Some of the best financial advice I have ever received was to take 20 percent of your income, and deposit it to a bank separate from where you do your normal banking. We've been doing that for 20 years now. Each year we go and decide what we're going to do with it. Most years it's been put in mutual funds. It's honestly unreal how much money you can save and you don't even miss it.

  9. In the UK lots of banks offer a ‘round up’/‘save the change’ option where it just rounds up the pennies the nearest pound and moves it to a savings account. It’s mostly for actual card purchases and there’s a wee dot beside each purchase on your statement this has been applied to, but it doesn’t work on things like direct debits/standing orders (or at least it doesn’t in my experience)

  10. Even better, if your current car is showing signs of age, start putting a “car payment” aside each month.

  11. Even better, start an investment account when the car is in great shape. I started investing for a new car with Acorns when my car only had 50k miles and was paid off. Now it has 75k miles and I’ve invested over $2k towards a car I likely won’t get for 7-10 years. It’s crazy how fast you can accumulate savings/investments just doing $10 or so a week. As long as I take care of my Tiguan which should hopefully last near 200k miles I should easily be able to pay for an off the lease car outright when the Tiguan dies.

  12. Yes, and many people, myself included, will often spend a sudden influx of cash after paying off a big debt. This type of thinking is valuable to people like me.

  13. I did this when I quit smoking. Suddenly I had money to go on vacation or renovate the apartment.

  14. There's a good calculator (probably a few) that show you how much you gain or lose, long term, when you change your payment amount. Once I saw that, I raised my payment to the highest I could afford.

  15. It's actually better for you to keep your monthly "minimum" manageable and then make an extra "principal only" payment for the rest.

  16. ...unless it is a nonsense interest loan like credit card you're almost always better off investing that money and making the normal payment on it

  17. Your grandpa was an incredible man. That's the kind of generosity and wisdom we should all aspire to have. I'll have to remember the car payment deal for my nieces. My current car is going to last forever and this is such a wonderful idea, I'd be happy to do the same thing when the time comes.

  18. Paying cash isn't exactly a smart financial decision if you can get a loan for ~3% and expect 7+% by investing. It doesn't really matter if you're buying like a $10k car, but get up to $70k and it really adds up.

  19. To go along with this: get a reliable brand that doesn’t cost an arm and a leg to repair anytime something breaks. The longer you can keep setting aside that payment, the more likely you can just pay cash for the whole next car.

  20. We are a honda house. 17 HRV and 21 Civic. As long as we dont total either one, my son will likely drive them in 11 years when he turns 16. With proper maintenance at least.

  21. To add onto this I saw a study the other day that Toyota is the most reliable car. Based on the percentage of cars still running after 200,000 miles. But Hondas were a close second!

  22. We have 4 Hondas. We just upgraded everything this year. Set for another 100k miles. My mom, dad, sis and myself.

  23. Pretty much any Japanese car except Nissans are a great way to go. Living in Colorado it’s crazy how many old Subarus you still see. With proper care 250,000 miles or more is totally doable.

  24. Paying cash for a whole car is quite possibly the worst thing you can do while car payment interest rates are this low.

  25. This is true. I paid a car off in my early 20s, kept banking the payments and saving to buy cars with cash. Never made a payment since. Car dealers don’t like it though - they make money from financing, so you can’t tell them you’re paying cash until the deal is made.

  26. Depends on how the market does and what you invest in. A cash savings account won't lose value, but will gain almost zero over time.

  27. I have never In my life seen a car dealer that was open and upfront about all aspects of the deal. They are going to hold you to the letter of the signed contract. NOTHING the salesman or finance person says is legally binding even with a handshake.

  28. I've had pretty good luck with Subaru. We put 50% down on a new car in spring 2020 (could've paid completely, but we didn't know what the pandemic was going to bring in 6 months so we wanted the extra cash in savings). Was able to get 0% interest on the car loan, some people don't believe me, but I read the paperwork, I check my monthly payments, it's 0% like promised.

  29. There is a cost associated with having too much cash savings: inflation. It’s higher expected value to invest instead and accept the debt (assuming your credit is good enough to get a low rate on your car loan).

  30. This is an LPT for financially illiterate people who have some money but will never get ahead because of this kind of advice. Sounds great compared to being poor, but you need to put your money to work, not just store it away like a squirrel. Don't earmark your money and stuff it under the mattress, read and learn how to invest it properly in a balanced way that still allows you to access some money as needed.

  31. I made my last car payment in 1999. Paying cash for used cars is one of the building blocks of my wealth.

  32. Putting it in savings is smart. But if you can get 0% interest, wouldn’t it be wiser to invest that money into an index fund and just buy GAP insurance?

  33. That is what the post is saying. You don’t literally keep paying the dealership, why would they save your money for you

  34. LPT: if you are mechanically inclined, 2000's car will be a much more viable and long term solution that will most likely outlast alot of newer cars.

  35. I just bought a 2002 car from my elderly neighbor because he was moving. No idea if it’s even a good car, but it’s clean and it was a hundred dollars.

  36. Honestly, this feels a bit like survivorship bias--the old cars that lasted long are the ones that didn't shit out in the first few years anyway.

  37. My car is paid off, but I got a loan after I ordered the new car I’m waiting on. This tip is the best of both worlds, bravo.

  38. Ok, I have a different take on this, especially for folks in the US. The car loan rate hovers at 2% when financed through a credit union. This means that an auto loan is coming in at a lower rate than even a home loan. So, my suggestion is - never close an auto loan. When you are close to finishing off a loan, refinance it by taking out cash against your car as equity. If your car is paid off, call credit unions and take an outright ownership auto loan.

  39. Have you seen the car market lately. Covid has has strange effects all around multiple industries. Id have agreed with this statement 3 years ago, but its less of the case now.

  40. Lpt: just buy older cars with cash so you don’t need to waste your money on new cars and more expensive insurance

  41. I exactly did that for the last 3 years, I have now $15,000. They gave me $7,000 for my Altima, plus I sold one of my two bikes for $10,000. I now have a FREE car!!! I will get it Tuesday 😁

  42. It's only depreciating in one aspect. A beer is immediately depreciated to 0 as they will not take a pint back and give you a refund. If you enjoy driving your car and gain freedom of mobility allowing you to go from point A to B wo waiting on trains, buses, etc. and it provides you w status then how much has it depreciated? It's sad when you come across ppl who can only think in terms of money bc life is about so much more. I drive a BMW bc I love to drive it. I take it twice a year to ATL motor-speedway for their open track BMW session.

  43. Ya lemme just take the train....that is 5 miles from my house and doesn't go anywhere near where I work...great tip.

  44. LOL I am doing this plus adding An additional $69.69....cuz it's for my Tesla! PS) got that first note paid off way early by adding extra $200/month. It can be hard some months but NEVER just pay the minimum.

  45. LPT: dont buy cars on a loan. a car is a liability, you can either afford one or buy a cheaper used on or rent one. Contracting a loan where you will pay twice as much for a car you can’t afford in the first place is just ridiculous

  46. Be mindful of your down payment. Inflation is over 8% right now. If you can get a car loan far below 8%, you're losing money by making a down payment.

  47. Even if you dint save it for a new car, you can just save it and use it for anything needed - car, vacation, household work or replacements, emergency fund, etc.

  48. In the past year both my wife and I paid off our cars. The car payments went to savings and a few other budgetary spots. We started spending more on maintenance to keep the car from breaking down. The car never really stops costing you money.

  49. You either pay payments for a new car with limited maintenance or you pay maintenance for an older car without a payment. Always budget to "pay" for your car.

  50. I plan on doing this with my house. I hope to have it paid off within 2 years and then all the extra will go into a retirement account.

  51. Did exactly that and when I realized I won’t be able to find a pickup truck for sale for years down the road I dumped it into I-Bonds. (Me and the wife together to max out the opportunity).

  52. This is great advice. I did this with my home equity loan. We got the loan through a different bank and if we paid it auto with a checking account from the bank we got the loan at we would save 3/4 of a percent. So I set up an auto transfer from my regular bank for $5 more than the payment and put down the initial deposit amount of $200. We ended up refinancing the main mortgage a year or two later to bring that interest rate down, rolled the home equity loan into the new mortgage but left the auto transfer. We're now using that money to go to my best friend's destination wedding in November.

  53. This is great advice in normal times when inflation was 2-3%. I paid off my car note just in time for my rent to increase !! no exaggeration- 39%!! Rent + car payment = new rent.

  54. this is a good tip, and if you try to only buy cash after this, you stop paying roughly 50% more for your car due to interest, and this turns into a positive feedback loop of savings. it's good stuff. plus you get small nickel and dime fees like loan origination fee and crap. I've bought cash the last 5 or 6 cars and that would've probably been $50k+ in interest I saved.

  55. I did this with my student loans during the pause. I don't pay much, but I can use it for a holiday or pay down my wife's student loans.

  56. Yep I do this with any bills that I end up eliminating or lowering. Car, student loan, phone bill, something like $500 extra has been going into savings for the last 6yrs.

  57. All of this advice is coming from people who clearly haven't bought a car in the last couple years and seen the recent market

  58. Pay it into something that’s going to bring a return rate of the same percentage of what your car interest rate was. Way better move

  59. I did this. Honestly, in a family of 4 with 2 working parents I don't have time for car shopping, so that payment has just added up. My paid off car at $10k, plus I saved up about $5k and I'm hoping to get a decent car for $15k and just continue making my same payments and just getting a way better car out of it.

  60. Did this and was able to put a $12,500 down payment on a used car. Both our cars are older it helped us plan for the next car.

  61. That is actually a very good advice in terms of planing everyone's budget. I've been practicing saving up for new phone and for vacation trip all year round for some time now and it gives a great feeling of security and stability in the crack times od capitalist dystopia and COVID

  62. I usually do this too, pays it forward in car repairs for whatever car we currently have or our next car whenever our current car breaks down. I say usually because I've had 18 vehicles in my lifetime, most of them were paid off on the first day but those ones with monthly payments, I did that for these ones. Again. Not every single monthly payment has been perfect either. I missed a few here and there because life and income are not always consistent.

  63. You have to find the right balance. I'm young and dumb but im figuring it out. It takes a lot of sacrsfice and compromise.

  64. I did this while aggressively getting out of debt. I kept the same budgets and habits and just filled a savings account. It all got drained from dental work but hey, I had it to drain!

  65. A car is something that depreciates in value. You are better off investing your car payment monthly and having less of a down payment on your next vehicle.

  66. Why not fix the current car when it has issues instead of buying a new car? I don’t think a person needs to ever buy a new car.

  67. ‘96 4Runner, SR5 stick. Been paid off for 17 years. Spend about $1000 a year in maintenance. 334k miles.

  68. Saving fiat dollars is a losing strategy at this point due to inflation. Money is losing purchasing power at historic rates. Saved dollars are losing more than 10% in purchasing power per year currently.

  69. Your finance company will be so happy. I suggest not sending them any more money though and open a brokerage account instead to have the amount auto deposited there.

  70. You really should not be saving money past a certain point. Instead invest that money and it can grow even faster.

  71. Too bad after I finished paying off my car, my rent went up by about the same amount as the car payment was...

  72. I highly recommend a budgeting app as well. YNAB is awesome, but it's $100 per year. Buckets is free and is very similar. But it's not cloud based.

  73. You shouldn’t keep more than 3 months expenses in a savings account. Inflation will always rob you blind, even when it’s not at record levels.

  74. I drove a shitty car for a while until I saved enough cash to buy a nicer car with cash. Then I put the payments in my bank every month. When my current car + the cash I have = the car I want, that’s when I consider buying a new car.

  75. I’m hopefully 7-10 years from needing a new car. I’ve been using Acorns to invest the money for a new one. Currently I’m down bc the market is down but I’m hoping with a longer time frame I can have an extra grand or so in market gains to help pay for the car.

  76. We do this and now never have to worry about car maintenance and repair costs. My mileage checks we get from work we also put in this account.

  77. That all sounds good but I never have vehicle payments. I buy a used mini van for cash. I have been driving my current one for over 3 years and had minimal repair expense. I payed $2,000 .

  78. Doing this and you can pay for a new car with cash every 5 years and save thousands in interest.

  79. Max out a Roth IRA first, you can just withdraw money if interest rates are so high you even want a down payment.

  80. I did this and after a while I actually increased my "car payment" a bit and used the money as a down payment for my house

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