Auto Loan Payoff vs. Savings Interest Rate

[jimbohoward69]

I currently have 22 months left on a 60-month auto loan at 0.9% interest (for a vehicle I purchased in 2017). It didn't seem practical to pay the loan off early with my savings since interest rates at the time were well over 1%.

Fast forward to today. My Capital One MM account is now paying 0.3% interest and I don't see that rate increasing anytime in the foreseeable future...which is now leading me to consider paying off the loan early due to the 0.6% rate differential. Plus, I plan on moving soon and may want to apply for a mortgage in my new city.

Would any of you pay off the loan early? Or am I just squeezing pennies?

 

[Dash man]

I currently have 22 months left on a 60-month auto loan at 0.9% interest (for a vehicle I purchased in 2017). It didn't seem practical to pay the loan off early with my savings since interest rates at the time were well over 1%.

Fast forward to today. My Capital One MM account is now paying 0.3% interest and I don't see that rate increasing anytime in the foreseeable future...which is now leading me to consider paying off the loan early due to the 0.6% rate differential. Plus, I plan on moving soon and may want to apply for a mortgage in my new city.

Would any of you pay off the loan early? Or am I just squeezing pennies?

I’ve ordered a car that will arrive by the end of the month. I’m only financing $7500 @ 1.9% to get the $2500 discount off the price. I’ll pay it off as soon as I’m past the minimum financing time period of six months for the deal. There’s no reason to finance more or for longer.

 

[Bamaman]

I'd just leave things as they are. Sure, you might save a few bucks.

I just feel better having decent cash in the bank, and the knowledge I can pay the car off at any time.

Yea, the current interest rates are ridiculously low. I have a somewhat big CD maturing in 4 days.

 

[pb4uski]

....Would any of you pay off the loan early? Or am I just squeezing pennies?

Yes. And Yes.

I used a bunch of cash that was in online savings and earning 1.7% to pay of our 3.375% mortgage in December 2019. At the time, we had one year left on our 1.9% car loan so I paid that off as well.

Six months later that online savings account was down to 0.6% so it turned out to be a good move.

 

[chassis]

I don't like debt, so I would pay the loan off if you have cash available.

 

[Ready]

The interest on both the loan and the savings is so low that it really doesn’t matter. Do whatever is convenient for you.

 

[RunningBum]

If you use the cash to pay off the car, are you going to feel short on cash and convert more of your investments to cash? If so, your overall portfolio return is a part of the comparison, but then you would also want to factor in the increased volatility and short term market risk.

Also, what if savings rates go back up soon?

Mostly I'm with Ready's post above, the difference is small, so whatever is convenient and feels right to you is fine.

 

[mystang52]

I think the dollar differential is small, but paying off the loan would likely be the better way to go.