Who has their truck Paid off?

Buzz, no different than any other question asked. And it is not broadcasting.

One of the best financial moves a person can make is to pay off the vehicle loan, then take the money you pay on the payment and save it so that you can replace the vehicle by paying cash for it.

Basically, if you can, put $75-$125 per week into a savings account (preferably a high interest account) and about every 5 years you have $20,000-$32,000 to plop on the new car.

I was blessed to be able to pay cash for the first time ever last week when I bought my Taco. Scared to death of dropping $28,000 all at once. But my wife and I have vowed to NEVER be in debt again (except when we buy a house.) Paying cash is a wise financial decision, and if you can't, then paying the loan off as quickly as possible is next. Saves you a few grand in fees and interest.

 

bought the truck from my dad...interest free thank God. just paid him all back. So it's now P.I.F.

 

As I just picked mine up on Friday, I won't pay the first dollar for it until middle of August.

I disagree with the notion that car debt is bad. I would agree with buying a car you can't afford is. I also think buying a car every fews years or leasing doesn't make too much finicial sence. I've always gotten low rates. This one is at 2.8%. That's like free money. But then I save 20% of my pre-tax income, so I realize I not the typical car debter.

 

I'm really not trying to start anything...but I gotta ask:

How is car debt a good thing?

If I save up for a car for 6 years vs. you paying for a car for 4-5 years...I MAKE interest, you PAY interest. In the end we both have a truck. Mine is NEW, yours is 4-5 years old. AND...more importantly...I'm several thousand dollars ahead. Thats a lot of mod money!

I respectfully disagree...a car debt IS bad. The way to go is to buy a cheap beater (my first three vehicles were beaters), save up and pay cash later for the car you really want.

 

You aren't starting anything, just my opinion.

I would agree, its not a good thing, I just think it is not bad either.

If instead of buying a car last week, and started saving my monthly payment, it would have taken me 4.5 years to save the money. I would have spent all that time continue to drive my 92 pickup when financing a new truck only cost me $380/yr or $32 month. It was worth $32 a month for me. And I can afford $32 a month.

If you are paying cash for a car, I would first ask to you have any other debts which you are paying an over all affecting high rate of interest (mortgages and student loans are tricky because they are tax deductable). Then, are you getting the full match from your employere on you 401(k)? Are you maximizing your contributions on a Roth IRA? Do you have an emergency fund with 2-6 months of expensives saved? Some people use debt because they cannot afford what they want--that is dangerous. Debt can be used as a tool to better manage your wealth. Companies, even those with strong cash positions, still use debt because of these advantages.

Its not for everyone, but car debt is not inherantly bad. I know some people are finicially conservative and are debt adverse, but that isn't me.

 

Nuke

Sound like you and I have very similar financial strategies. I agree on everything you said with a tiny tweak (see below). I'm quite blessed. I've been able to max out a Roth IRA for both me and my wife every year for the past 10 yrs or so. I put the max allowable into a my retirement account each year. I have eliminated ALL debt...including my house. I have a substantial emergency fund. And we've just started playing the stock market a bit with some "play" money. I should use some of that money for mods now!

My tweak:
I agree that debt can work to your favor...but ONLY when investing/speculating for future gain...never on consumer goods.

 

That's good point there. I don't think it's always bad either.

There's also the people that live in rural areas with little to no public transportation and NEED a vehicle to get around. For example, I live 20 miles from work. No buses or trains to get there. No co-workers to car pool with. Yearly emission and safety inspections the vehicle must pass that are electronically sent to the DMV so no tipping the mechanic to make it pass. So it's impossible to save money for a few years for another vehicle. It was also getting impossible to make a beater pass inspection each year. My last one burned oil, needed new suspension all around, new muffler... I was constantly putting money into it wondering what would break next, or if it would die on the side of the road. Every used car I looked at that wouldn't require that kind of work was over $10k for anything bigger than a 2 door civic or focus. And would need to be financed anyway.

People talk about getting a "cheap beater"..... Well, my mother inlaw's car is a used one not from the dealer. Her mechanic neighbor swapped the engine from her car into an identical model in better condition to save them money. Every time I think about getting a used car to last a year or two to save money, I look at how many times she borrows MY car because her's is broken. Each time it takes her mechanic a week to figure out and fix the current problem. They've been dealing with the engine randomly shutting down for no reason for a month now. New coil paks and plate, new crank sensor (neighbor needed to buy a new tool to change that), and who knows what else but it still happens.

So it comes down to the lesser of 2 evils I think. Do you want to be debt-free, or do you want/need a reliable vehicle NOW?

Personally, I took debt over wondering if my wife and kids were stuck on the side of the road in a broke down used car I bought because it was cheap, and I didn't want to be in debt. But I guess family is worth that to me.

 

Nuke, you are paying more than that $32 a month. A vehicle - unless it is a collectable classic car - is a depreciating asset. So on top of that interest, over 5 years that is $1,920.....in addition to the depreciation of the vehicle.

Fortunately, we were debt free in early October of last year. A tremendous blessing to have done so. However your statement about student loan interest being tax deductable is not totally accurate.

We make too much money to claim a single, red cent of our interest. Other than my absolute despisal of debt in any form, my first full year after graduating from grad school we made too much money. Because we made too much money, we could not claim ANY of the $7,000+ in student loan interest that we paid. And only PART of that interest is deductable. You do not get full credit for all of that money spent. The same applies for the amount you pay in mortgage interest. You only get PART of that money as a deduction, not in a dollar for dollar amount.

You made a choice to replace that 1992 truck. When that truck is paid off you should just take that money and drop it into a high-interest or certificate savings account so that when it need replacing you can just plop down the money on that year's Tacoma and get all the mods you want.

And you are very smart to have a 6 month savings account for "emergencies."

Unfortunately, many of our fellow posters and our fellow citizens in the U.S. and Canada are out of work. Having that money is a great lifeline and is great those unforeseen issues that occur in this journey we call life.

Also unfortunate - that people do just what you have stated they do.....They buy more car than they can afford, or need. Same for houses. Too many folks want to keep up with their neighbors, or show that they have "arrived." Behind the scenes they struggle week to week to pay the bills and survive.

Two of the best financial folks I have ever listened to are Clark Howard and Dave Ramsey. I know some folks have issues with them, but much of the advice and counseling they give you to manage your life and help prevent you from stressing over debt. And it is FREE! You can't beat any advice when it is timely, good, and free.

 

Tiger, in some situations you have to. But, when the car is paid off - if it is possible - continue to pay that money to yourself so that when it needs to be replaced you can tap into that fund and pay for it outright.

Trust me, I feel the pain. I have been there. Took me until I was 36 to be able to pay for a vehicle outright. No one is saying it is easy to do, just that some of us think that it is a wise thing to do for the long term, financially speaking.

I would not want to worry about my wife being stranded either, and there comes a point that you have to choose to make that decision. You did what was best, and going off of your story I don't think it was the wrong decision.

 

Yeah, not much choice in the matter. Surviving on my income alone until the wife gets a better job than Taco Bell. That required her to go to school days and work nights. I'd meet her at work during the winter so she had the truck to come home on unplowed roads at 2am instead of the corolla. Now she's done with school and looking for the better job. We still need the second vehicle, and she'll end up driving at least 20 miles one way for work. It's tough having payments, but she needs a reliable vehicle. I'd love to live down south where a $500 car will last years, but in NY you can't get a vehicle under $5-$10k that doesn't need a lot of work (rust, salt corrosion, etc). None of the dealerships I looked at had anything under $10k. Small "mom n pop" dealers probably had ones for less, but no warranty, no point by point inspection like Certified Pre-owned ones. I've seen several people buy cars from those places only to trade or junk them months later due to major failures or repairs needed. My mother inlaw's car has be down for a month at a time several times. My father inlaw's truck has been down a few times too. Sometimes both at the same time. Meanwhile my new tacoma and used rav4 have been running solid, and have been loaned to them a few times.

I just don't have time to deal with that kinda crap. Wife and I were both working for a while on opposite shifts, she was going to school, 3 kids.... I barely had time to repair the corolla when it needed it.

Just planning to pay both vehicles off early after she starts working. Then build up savings and pay the mortgage down. Also have home repairs planned to cut heating/cooling bills to help further. It's just impossible to have that much liquid cash to do things without financing without winning the Lotto.

In the mean time I'm taking advantage of my company's 401k and credit union.

 

me too.. loans suck, why pay all that money in interest.

 

Paid cash, now time to start the mods!

 

I have 2 more Payments and its all Mine ! ! !

8k down w/3.9% APR was not bad at all for me.

3 year plan.
​

 

Tiger,

One of the reasons we bought the new truck, it was not totally needed, is that the in-laws' car diead after 14 years. My father-in-law is crazy enough to buy a new car, on a retired person's income.....so we gave them our Subaru wagon.

My wife is starting to really consider the whole procreation thing (I am not the biggest fan of kids) and we will be buying a house within the next year. So if she spawns little tax deductions we essentially go to a 1 income family and I would rather have 2 new/newer reliable vehicles under warranty to get us going.

So she has the '07 4Runner (which I LOVE) and she said I get to keep the Tacoma...that broke my heart, let me tell you.

And your point about used cars is valid. Normally, it is better to buy a car that is 1-2 years old due to the depreciation, but whenever we try this tactic we seem to only be able to find a car that is just a couple grand less than what I could buy a new one for.....and if I buy new, yeah I am paying a couple grand more but I get the warranty and I get something without 20,000-30,000 miles on it.

Just my rambling thoughts.

And when your wife gets the job, just try to tuck away $100 a week into an account to build up a car fund. In your situation it seems that you would not really miss it since you are already living on just 1 income. Anything more than that, in your current situation, is gravy.

 

yeah, i plan on tucking away money as soon as we're able to. Won't need a new car for a while (hopefully!) since we have the 06 Tacoma and 07 Rav4. But we do have other debts to pay down and could dump more money on the house.

 

Truck is paid off...but now I got big second mortgage on the house!
The interest is really low and I get to deduct it from income taxes.

 

Yeah, I hear you! In this economy it's a real toss up between dropping all the money now to be debt free, or keeping money in the bank incase you lose your job and need that cash for other things.

 

Paid for it with one check for $18,995.75. Biggest check I've ever written, and boy do I feel broke...

EDIT: I'm 100% debt free*, still have a 1-year cash reserve, and I'm putting 12% into a 401(k).

*I owe my parent's a lot, but that's a debt not measured in dollars.

 

x2

 

still trying to depreciate the value on the lease so it will be cheaper when i buy it.