"I pay $425 every month just to get a tiny amount ahead": Should I pay off my current auto loan or save for a large down payment on a new used vehicle?

Hello

Ayo Money Minder,

Last February, I splurged on a “new to me” 2018 F-150 for $37,000. I put down $17,000 and now have around $17,000 left to pay off. The monthly payment is $377 for 60 months at an interest rate of 4.99%. I’m doing $425 each month to try and chip away at it faster.

Now, the missus needs a new ride because her current one is on its last legs. We’re thinking something in the $25,000-$30,000 range for her. We’ll wait for a killer deal on the interest rate like we did for my truck.

So, here’s the pickle – should I pay off my truck completely and finance most of my wife’s new car? Or should we save up for a big down payment on her vehicle and handle two smaller payments of around $370 each?

We’re a D.I.N.K (Dual income, no kids) household with a pup. Bringing in around $7,500 net per month, and our bills total around $3,000, including the mortgage. I usually have a credit card balance of about $1,000.

We’ve got about $70k in savings, but we want to avoid dipping into those for the new car. Our plan is to have $10,000-$15,000 ready to go when we make the purchase around January/February.

Thanks a bunch!

Sincerely, Road Trip Ready

Response from THE MONEY MINDER:

Hello There,

Hello,

It sounds like you’ve done an excellent job managing your current vehicle payments, and I commend you for your financial responsibility. Given your financial situation and goals outlined, here is a practical approach to consider.

Firstly, focusing on paying off your remaining balance on the 2018 F-150 would be beneficial. By eliminating this debt sooner rather than later, you could free up extra funds that could be redirected towards your wife’s new vehicle. Since you are already making additional payments on your pickup, it may be wise to continue this strategy until the balance is paid off entirely.

Regarding your wife’s new vehicle, saving for a significant down payment is a sound plan. Having $10,000-$15,000 in hand when purchasing the new car can help lower the monthly payments and overall interest costs. If you can secure a favorable interest rate like you did with your pickup, financing a portion of your wife’s vehicle may be a practical option. This approach can help you maintain a healthy savings balance while balancing the burden of two smaller monthly payments.

Considering your dual income, manageable monthly expenses, and savings buffer, you are on solid financial ground to navigate these upcoming vehicle purchases intelligently. Prioritizing debt repayment and saving for a substantial down payment can set you up for financial success in the long run.

Best of luck with your vehicle purchases, and remember to stay proactive and mindful of your finances.

Farewell from THE MONEY MINDER.