Car Loan Payoff....With Company Allowance

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beachbum5011
Posts: 31
Joined: Thu Apr 06, 2017 8:26 am

Car Loan Payoff....With Company Allowance

Post by beachbum5011 » Sat Jan 12, 2019 9:49 am

Looking for some insight. I am trying to figure out the best solution for potentially paying off my personal vehicle that I use for my sales job. My current company allocates $600 monthly for driving expenditures plus a fuel card. I average 30k miles per year and have 88,000 miles on car already (car is 3 years old). My current interest rate is 2.94% and I owe $14,328 left on the vehicle. There are still 3 years left on the loan, which would equate to ~180,000 miles if I kept the vehicle for 6 years. If I decide to get another vehicle for work beforehand I do not want to rollover the ($5000) negative equity it has, nor do I want to put money down on a vehicle that I rack up miles on per year. Some of my colleagues have purchased salvaged, low-mileage vehicles, ie co-parts, fixed the damage and have had success.

What are your thoughts??

My current payment $427
Insurance is $102 per month
Pocketing $71 monthly that goes towards wear and tear items. Although these items are starting to become more expensive as mileage increases (I have replaced all tires 2x already), brakes, battery, countless oil changes, 3 front windshields, fuel evap sensor, and now i hear the turbo could have issues at 100k

Blake7
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Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Car Loan Payoff....With Company Allowance

Post by Blake7 » Sat Jan 12, 2019 10:03 am

Your annual mileage will depeciate a vehicle very quickly. I’d pay off the loan, and run the vehicle into the ground. Moving forward, pay cash for low-mileage used vehicles, and use the $600/month to build up a vehicle purchase and maintenance/repair fund. I think you’ll pocket more of the money, too.

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grabiner
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Re: Car Loan Payoff....With Company Allowance

Post by grabiner » Sat Jan 12, 2019 12:02 pm

Paying off the loan is a risk-free, tax-free return of 2.94%. Independent of anything else, that is a good deal (as long as you don't have a better use of the money, such as paying off higher-rate debt, getting the IRS subsidy on an HSA contribution, or getting the employer match on your 401(k)).

You will eventually need a new vehicle, so it makes sense to save the money that was going to car payments in a bank account or short-term bond fund, and use that in order to avoid the need to take out a new loan.
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Topic Author
beachbum5011
Posts: 31
Joined: Thu Apr 06, 2017 8:26 am

Re: Car Loan Payoff....With Company Allowance

Post by beachbum5011 » Sat Jan 12, 2019 5:14 pm

grabiner wrote:
Sat Jan 12, 2019 12:02 pm
Paying off the loan is a risk-free, tax-free return of 2.94%. Independent of anything else, that is a good deal (as long as you don't have a better use of the money, such as paying off higher-rate debt, getting the IRS subsidy on an HSA contribution, or getting the employer match on your 401(k)).

You will eventually need a new vehicle, so it makes sense to save the money that was going to car payments in a bank account or short-term bond fund, and use that in order to avoid the need to take out a new loan.
The only debt is my mortgage. Otherwise, no other loans, and and pay off credit cards fully every month. Unfortunately, I cannot contribute to a HSA due to electing a PPO plan. I max out my 401K each year, set up a backdoor Roth, and also contribute towards a taxable brokerage account.

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