Should i keep my safety net money in savings or refinance my type r!?

[Bobbyt]

So my car payment is 626 per month at 7.2 percent 60 months. Should I refinance at a credit union I have 15k saved currently and could slap it down bringing my payment into the mid 300s.Another option could be keep the money in a sketchy economy and pay towards principal per month.i could afford a extra 1k per month to attract the balance. what would and should I do?

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[zumbooruk]

7.2% is high.

I just got an offer from Pentagon Federal Credit Union at 5%, there might be other lower rates (I just happen to be a PenFed member)

keep the cash in high yield savings (about 4%) for a net interest of only 1%

cheap insurance if you need the cash.

https://www.carputty.com

https://www.southeastfinancial.org/car-truck-loans

https://www.penfed.org/auto/refinance

https://www.navyfederal.org/loans-cards/auto-loans/auto-refinance-rates.html

https://www.autopay.com

 

[chopsuey34]

7.2% is high.

I just got an offer from Pentagon Federal Credit Union at 5%, there might be other lower rates (I just happen to be a PenFed member)

keep the cash in high yield savings (about 4%) for a net interest of only 1%

cheap insurance if you need the cash.

https://www.carputty.com

https://www.southeastfinancial.org/car-truck-loans

https://www.penfed.org/auto/refinance

https://www.navyfederal.org/loans-cards/auto-loans/auto-refinance-rates.html

https://www.autopay.com

Without getting into advanced finance and capital market expectations, this is a pretty good plan.

OP, refinance with as good an interest rate as you can. Keep the cash in a money market fund in your brokerage account, and you can immunize your debt pretty well (fancy way of saying paying 5% interest but receiving 4% interest on your cash).

Having cash is always best, especially in uncertain economic times.

VBIL and BIL are two good money market funds that will yield higher than a high-yield savings account.

*this is not financial advice, always seek professional advice when making financial decisions.

 

[TiNuts]

I would put that money into a high yield savings acct, or similar, depending on your needs, if it isn’t already. Then I’d try to find a lower rate. You should be able to get about 4-6% in some sort of savings account, & hopefully you can get your car down to around 5%.

 

[Tougefl5]

So my car payment is 626 per month at 7.2 percent 60 months. Should I refinance at a credit union I have 15k saved currently and could slap it down bringing my payment into the mid 300s.Another option could be keep the money in a sketchy economy and pay towards principal per month.i could afford a extra 1k per month to attract the balance. what would and should I do?

Only you can really answer this question. However me personally I like my money to be working for me. I don't believe the economy is that '' shaky'' I made money this month when everyone was scared about tariffs. I also spent my profits on a new intercooler.
Take your time and figure out how your money will serve you best. If you're not sure then just keep stacking cash.

 

[CaptainUnderpants]

This is the most fiscally responsible answer.... You should not own a car with debt.

Buy a 10 or 15 year old Honda or Toyota for 5-10k with no debt. This is the most responsible. Also the least fun.

Maybe you can use debt when purchasing a car if you already own a home that you can afford, contribute 10% or more of your income to retirement, own some positive cash flow investment property, have a 30k rainy day fund and have fully funded life insurance.

Until your financial future is on track avoid consumer debt. This is the only way to grow wealth and get off the debt treadmill.

 

[StingertimeNC]

OK, but real world, you gotta live a little. You could drop dead next year. God forbid.
best to put cash in the bank and maybe pay an extra $100-$150 on the car every month. refi if it makes sense of course

 

[ajgrinds]

If the car was paid off, would you take out a 7% loan against it to put in the bank? Of course not. Pay off the car while keeping like $1,000 emergency fund. If things go worse than that you can always take out a loan again.

Also the 4% savings account has a 25% tax on it making it really a 3% savings account and if inflation is 3% that turns it into a 0% savings account.

 

[Bobbyt]

This is the most fiscally responsible answer.... You should not own a car with debt.

Buy a 10 or 15 year old Honda or Toyota for 5-10k with no debt. This is the most responsible. Also the least fun.

Maybe you can use debt when purchasing a car if you already own a home that you can afford, contribute 10% or more of your income to retirement, own some positive cash flow investment property, have a 30k rainy day fund and have fully funded life insurance.

Until your financial future is on track avoid consumer debt. This is the only way to grow wealth and get off the debt treadmill.

99 percent of type r owners finance. Most people don't buy 50k cars in cash without financing them

 

[CaptainUnderpants]

99 percent of type r owners finance. Most people don't buy 50k cars in cash without financing them

A survey conducted in 2019 found that 58% of Americans had less than $1,000 saved. And 40% retire on SS alone.

Just because, as you say, "99 percent finance" doesn't make it a good idea. It is the reason that about 50% or more of Americans retire in poverty.

NOTE: AI Actually says 29% pay cash for their cars.

 

[StingertimeNC]

Nothing wrong with financing a car, as long as that expense plus housing expense is well within your means from a monthly perspective. You don't want to be house or car poor, or forced to carry other credit card debt.

Just my opinion.

 

[ABPDE5]

Nothing wrong with financing a car, as long as that expense plus housing expense is well within your means from a monthly perspective. You don't want to be house or car poor, or forced to carry other credit card debt.

Just my opinion.

This, and the peace of mind that comes with having a rainy day fund (and potentially more than that, given unfortunate circumstances), can be worth paying interest on a car loan (depending on the balance and rate). You can always keep some $ on hand in the event things go south while making addtl. payments on the car in the meantime. There are plenty of viable and responsible options for OP, here, even if they aren't 100% economically efficient.

 

[MoodySara]

The OP, BobbyT, never said how old he was or his current obligations for family, housing, etc.
The answers that speak about the different financial options are quite sensible.
But, I especially liked the "you've got to live a little" answers.

I was 22, unmarried, not even a steady girlfriend, living in New England.
I don't remember exactly, but if I had $1000 in savings or checking, it would surprise me.
Being 22 and a car lover, I did the not-so-sensible thing. I bought a new Porsche 911, financing every dime, packed all my earthly possessions in it, and drove cross-country to my new job in California.

I had practically nothing except good job prospects. I didn't even own any pots, pans, dishes, sheets or towels. I rented a furnished apartment, bought what I needed to live, and had a good time.

I'm at the other end of my life now. Looking back, I don't think I'd change what I did then.

Just a thought,

 

[Cueyo]

I'd like to counter and say I have paid for mine, cash in hand, but my original intent was to finance for 24 or 36 months

There's a lot to say about being financially sensible I think. There's an extreme end where people say "drive a $2000 beater and hoard your money or else you'll be poor forever" (Dave Ramsey shit). Then there's the other end where people with minimum wage jobs lease a $70,000 BMW and constantly complain about being poor. In the case of this forum, I'm gonna bet most of the people here are in the middle. Capable of paying for their car, but also having some obligations that keep them from being more loose with their money.

I'm of the "live a little" school of thought. I see no need to hoard my money and buy a Corvette at 65. I would rather have the largest chunk of my money in my 30-40s. I think it speaks more to people's focus on money that they want to drive expensive cars or hoard their money than it does to anything else about them (ie: the two ends of the finance spectrum are greedy people). But then again, I did buy a $48k suped up civic because I thought it would be fun

Also no one likes financial advice on a car forum. Know your audience, doesn't matter how good of a person you want to be.

 

[ajgrinds]

Also no one likes financial advice on a car forum. Know your audience, doesn't matter how good of a person you want to be.

Except OP asked for it…

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