Hello, Friend got a new truck. Price of truck OTD = $45k Down payment at time of finance = $2k ($43k financed) Interest = 6.9% Total for 75 months = $55.5k roughly which means it’s about $10k of ONLY interest. Payment = $710/month
Correct me if I’m wrong but in theory this truck can be paid off tomorrow and my friend pays none of the $10k interest, right? Anyway, my friend has a check that he wants to use of about $23k. My question is: is it better to put the $23k towards the auto loan right now (ensuring that the money goes towards the principal) or is there a better alternative like placing the money in a HYSA and earn about a 5% interest (I know it can fluctuate) and use that account to pay off the debt gradually? He’d be paying a lot more than the minimum monthly as well. I guess the only upside to this is though is having more cash liquid if ever needed.
If it was paid off, no he would pay nothing in interest. If he’s throwing down half of what he owes on that loan, it will still accrue that 6.9% of interest, but on a low amount so the number won’t be going up as quickly as it would be on 43k.
And as absolutely awful as 6.9% is, I’ve been in the car business for 4 years, and I have not seen a rate below 7.49 in 6 months 🥲 (not including new car incentives, those are lower but your not going to find a 1.99% anymore)