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I have paid off every, single car loan I've ever had. And I have never been upside down on a car. Ever. Sounds like your friends are just irresponsible.
Bought my first car thirty five years ago with a 5K loan from my mom - paid her back within 6 months. Always saved, and bought for cash ever after. Best deals that way. Only time I ever took a loan for a car after that was with 0 percent financing (and there was no better deal that I was turning down for it, like cash back). Now I tell my kids to save, save, save, so that they can be beyond the need to lease or take a car loan as early as possible in their lives.
Actually, a lot of car dealerships make more money off the financing than they do off the car itself, so cash no longer gets you a better deal. Dealerships are more likely to give you a lower price knowing that they'll make it up on the loan. You used to get better deals with cash back when everything required paper. And dealerships actually had to wait to receive the money when you financed. By they get the money right away now, same as cash.
You are probably better off financing a car, with no early pay off penalty, and then paying off the loan a week later.
My current car is financed at 0%, so I have no incentive to pay it off early.
5 years is about all I'll do, even a low interest rates.
By then I just want it to be over, then I go awhile paying myself instead of the loan provider.
I've had just one car loan in my life. I paid it off, then kept driving the car for another 17 years and put over 400K miles on her. Of course it was a manual transmission Honda Civic. They run forever.
I currently own a $1500 Civic hatchback. I usually just pay cash for my cars. The most I've paid in cash was $2500 for a 1994 Acura Integra GSR sedan.
You pay off your loan if you had a really bad loan with high interest rate. If someone refinance their loan, they had to be able to get a better loan with low setup costs. More than likely people are simply getting into bad habits by extending their loans and incurring more interest over time than their previous loans.
I bought a car in 1986. A couple years later, they claimed they didn't get my monthly payment; I got at least a dozen calls from them before they got the copy I sent of the cashed payment check.
So I decided to pay it off. Got the final number from them, mailed the check. Couple of weeks later, I get a bill for a few bucks. I call, they say it's interest. I say I paid the amount you told me. They argue, I go ballistic, they decide to waive it "as a courtesy."
So does anyone pay off their loan and later get a good deal and buy? Not buy upside down.
Yes. We paid off all of our car loans except one. The remaining one is a true 0% interest loan from VW, so I see no reason to pay it off early. (We get letters and emails from them every month practically begging us to "trade up" to a new model .... no thanks, I love our CC and I really don't mind the 0% loan).
We used to lease, but eventually decided that was a losing game for us. Now we are back to owning, interest free.
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