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Q: Just paid off my car - what's the best decision to make out of the following?
A: Load up on consumer debt. Take out a line of credit, extract the cash and head to Vegas. Always split aces & eights, and double on 11 unless the dealer is showing an ace.
Drive home poorer but with the knowledge your car is paid off.
This looks like sound advice! Are you really Ann Landers?
I have to shake my head at how Detroit has sucked people into this kind of massive debt for at least 5 years plus full coverage insurance costs for four wheels and a seat that loses value the minute it's driven off the lot and by the time it's paid off it's already out of style, starting to rust, needing repairs.
Ive NEVER bought a new car and never will, the last 4 cars I owned since 1994 were all bought used, all totalled the 4 cars cost me $2600 to buy since 1994;
A 1982 Honda Civic wagon, $500 around 1994, had the engine rebuilt at Honda for about $1100 and put 70,000 miles on it getting an average of 38 mpg, replaced it around 2000 with a 1989 Chevy Corsica bought from a co-worker for $100, he drove it 120 miles a day to work and it had 190,000 on it, so it was all highway miles and it was in good shape, never needed ANY engine or transmission repairs.
I replaced it around 2007 with a '92 Olds Cutlass wagon, bought from the same guy for $900, never needed any engine or transmission repairs, only other non-maint repair it ever needed was having the wiper switch replaced- entailed removing the steering wheel/airbag to do it, and the brake master cylinder.
I sold the car in 2017 for $100 to the scrap yard as the underframe by the left front wheel corroded pretty badly by then.
Bought in Jan 2017 an $1100, 2003 Concorde LXi with leather seats, in excellent condition, no rust, 117,000 on it, was last owned by an older couple who kept it garaged and were it's second owner who bought it from a rental car outfit who had it as a rental car it's first year.
It needs a new solenoid pack in the transmission as it wont shift into top gear, but I mainly drive it around town and rarely ever need to get on the freeway, so it's a repair I can do whenever, even then, with about $1,000 to do the work needed for that- that's only 3 months of your $336 car payments on that 2013 car!
I paid cash for the car, no payments, no interest payments, no expensive insurance required either.
People should stop looking at cars like some kind of "investment" even if you could ask $15k for the vehicle after having paid $25k for it plus interest every month and full coverage insurance- you'd have income tax to pay on it and nobody is going to pay the full amount anyway, you'll price it $15k and have to compete against people shopping around and finding the same vehicle around elsewhere for $10k and offer you $13k for yours.
You'd be far better off buying a decent late model used car in good condition, pay cash, and investing that $336 you'd otherwise have spent every month- on something that will bring in a profit, be it gold, a 401k plan, interest bearing etc. If you have a balance on a credit card or mortgage, pay that completely off and save that interest- its an immediate 8 to 18% payback right there.
^ the big thing I see is people just looking at the payment and buying the best car that they can make the payment on. Oh look, our budget says we can come up with $450/month that we could spend on a car...let’s find the best car for $450/month. Meanwhile, their budget also includes credit card debt at 15%+, a mortgage at 5%+, student loans at 7-8%, etc. And they have little-no savings or retirement. They basically have pretty nice stuff but they live paycheck to paycheck to afford it and will probably work until they’re 75. A lot of people are just allergic to the concept of delayed gratification - sacrifice a little now and be rewarded exponentially later. Of course living that way will mean not keeping up with the Joneses.
I also just paid off my car loan! Man, did that feel good!!
1. My plan is to keep the car, maintain it well and drive it right into the ground. I am so sick of those bastard car payments I could puke!
2. The next step which has already begun, is to add the amount of the car payment to my only other consumer debt, a Visa, and have THAT bugger paid off by the end of this year. Thereafter, pay off any balance each month.
3.After that is accomplished, and the only debt to my name is a not-enormous mortgage with 3.75% interest, is to sock what was being paid to debt in #2 into my emergency fund for the whole of 2019.
So, in 1.5 years, I'll be right where I want to be: only debt is a low-interest mortgage and...... oh yeah, that's it! Mission accomplished. I'm looking to retire in maybe 5-6 years and want to be debt-free when I stop working. I also want a very healthy emergency fund built up.
Of course, life has a way of messing with our plans, but even so, just get past whatever bump in the road and get right back to the plan. May delay the end, but will still make it.
My advice to you, echoing so many others here is to keep your Subaru. They're fantastic vehicles and will last you many more years while you accomplish more important financial life goals.
... the biggest assumption is that you'll get 55mpg from the Prius (you're at about average for the Outback, and average for the Prius is 44mpg ~ takes a MAJOR shift in driving to get even a couple MPG better than average).
Assuming $2.69/gallon for gas (my local station) and 13k miles per year (insurance average), you'd spend only $550/year less on fuel. Not insubstantial, but hardly a huge savings that's made less by the interest you're now paying on the New car....
Brian's correct about this. I've been driving my 2015 Prius since new and have ~95K miles on it now. It is the most dependable car I've ever owned, and it also gets great mileage, but averaging 55 mpg would be pretty tough. I averaged barely 45 mpg last year and felt pretty good about it. A good chunk of that was interstate driving at 80 mph, but a bigger chunk was spent at speeds that result in higher mileage, from 55-75. The Prius really suffers at speeds above 65-70, so if you never drive faster than that, you might push your average MPG close to 50. It's the NEW Prius, 2016 and newer, that claim 55 mpg, not the older ones.
Unless you drive lots of miles, you won't save yourself much in fuel costs over an Outback. I bought mine to replace an F250 diesel. At 30K miles per year, and fuel, tires and oil 1/3 what I was used to, my Prius has saved me a considerable amount since buying it. The amount it's saved me in unexpected maintenance (compared to the 3 years before trading the F250) was enough to pay for the car in full!
But you apparently don't do a lot of driving, and your repair bills aren't out of control. I'd stick with what you have and work on a rainy day fund, car replacement fund, and then work on investments or mortgage payoff.
It's really important to have some cash liquidity.
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