Automotive

Pay car off pretty early or don't bother?

  • Last Updated:
  • Feb 2nd, 2019 11:12 am
[OP]
Deal Fanatic
Aug 14, 2007
9542 posts
1080 upvotes
Toronto

Pay car off pretty early or don't bother?

I financed (over 7 years just to make the monthly payment lower) a 2017 Civic Hatchback Sport in Apr 2017. I currently owe (around) $27,000 on it. Right now I have 11K sitting in savings (not including investments/RRSP, etc) and am debating on whether or not to pay it off by the end of 2020 as I probably could.

I have no other debt at all, just the car, would you pay it off early or just ride out the remaining years of the finance? I plan to keep this car until it's no longer driveable as well (hopefully).

Another option I thought of is depending on how the rest of the year goes, pay $15,000 off at the end of this year then ride out the rest of the finance term...

(Payment is $430.18/month). Insurance full coverage (which I would bring down to minimum coverage once paid off) is $1600/year in Toronto)
44 replies
Deal Guru
Jan 15, 2006
11112 posts
6579 upvotes
Richmond Hill
You pay it off early you save interest. Also why in the world would you reduce insurance after you pay it off? Are you talking about liability only? If so that’s a real head scratcher.
Sr. Member
Aug 16, 2009
989 posts
200 upvotes
Toronto
Always pay off/down your debt as fast as you can... unless you are able to make more from the borrowed money.
Newbie
User avatar
Mar 14, 2016
56 posts
63 upvotes
Ontario
michiebaby wrote:
Jan 27th, 2019 12:32 pm
Always pay off/down your debt as fast as you can... unless you are able to make more from the borrowed money.
This. If you think you can get more % return on the money by investing it than the current interest rate of the car loan then don't pay it and invest instead. If it's the other way around - pay the debt first!
Qui Tacet Consentire Videtur
Member
Apr 15, 2014
444 posts
382 upvotes
Toronto, ON
If this is a sub 3% loan i would pay the minimum and go the full 7 years
Please respond
Jr. Member
Sep 7, 2007
159 posts
47 upvotes
Woodstock
If you have the money saved, pay off the loan for sure. Unless your savings are earning more interest than the loan interest, which I doubt.
Deal Addict
Sep 1, 2004
2532 posts
1502 upvotes
If your RRSP isn't maxed out, putting that $11k in there will get you min 20% back as tax savings.

Putting that $11k into the loan will probably net you less return than that.

The next debt to service is mortgage because it's amortized and way more expensive than you car loan.

If you have no mortgage, no sure way to make 6+% on your $11k, pay off the car.

Insurance doesn't change just because your car is paid off. Its a finance and not a lease, you decide what risk you want to cover. If you think you can afford to lose the value of the car due to theft or your fault, don't buy comprehensive.
Deal Fanatic
Oct 6, 2007
6776 posts
2860 upvotes
Kootenays
Xtrema wrote:
Jan 27th, 2019 1:16 pm
If you think you can afford to lose the value of the car due to theft or your fault, don't buy comprehensive.
Comprehensive coverage does not cover the value of your car in an at fault accident, collision coverage does.
Deal Addict
Sep 1, 2004
2532 posts
1502 upvotes
smacd wrote:
Jan 27th, 2019 1:25 pm
Comprehensive coverage does not cover the value of your car in an at fault accident, collision coverage does.
Is there people out there who buy comprehensive and not collision?
Deal Addict
Nov 10, 2018
1391 posts
1226 upvotes
Depends, do you have a T2200 and can write off the interest as employment expenses? If so, that may change things.

Still though, I'd pay it off.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Deal Fanatic
Jun 24, 2006
6436 posts
1226 upvotes
CardinalComb wrote:
Jan 27th, 2019 12:46 pm
If this is a sub 3% loan i would pay the minimum and go the full 7 years
Car dealers and banks love this mindset. Why? Because few ever actually pay it off. Once they hit 4 or 5 years in and realize they are still paying the same amount for their 5 year old car as they did the day they drove it off the lot, and still have 2 more years to go. They will start looking for one of those "amazing" getting you into a brand new vehicle for the same payment or less "deals", and start the who process over again.
Last edited by Gutty96 on Jan 27th, 2019 2:18 pm, edited 2 times in total.
[OP]
Deal Fanatic
Aug 14, 2007
9542 posts
1080 upvotes
Toronto
EP32k2 wrote:
Jan 27th, 2019 12:28 pm
You pay it off early you save interest. Also why in the world would you reduce insurance after you pay it off? Are you talking about liability only? If so that’s a real head scratcher.
Lower insurance premium but I'll probably keep full coverage anyways.
Deal Addict
User avatar
Jul 26, 2007
3749 posts
1469 upvotes
Toronto
How much is the interest on the civic?

If your civic is 1.99% pay off your mortgage or invest in TFSA. If it's 4.99% or higher pay it off.
Deal Fanatic
Oct 6, 2007
6776 posts
2860 upvotes
Kootenays
Xtrema wrote:
Jan 27th, 2019 2:05 pm
Is there people out there who buy comprehensive and not collision?
Point is, it's 2 separate coverages. And yes, I do on my 2002 F150 and my motorcycle, a '77 KZ1000. I'm more worried about a collision with wildlife with the truck or theft with the motorcycle than I am about an at fault collision. I'm 45 years claim free of at fault collisions.
Jr. Member
User avatar
May 17, 2008
167 posts
87 upvotes
Toronto
As mentioned, put your money into RRSP instead, if you contribute a lot within one single year, your tax return would be huge.

It's one thing to pay interest to lease a car, at least you are going to drive another new car in 3 or 4 years. Paying interest in today's rate for such long term just to borrow money is not a good way to manage your money.

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