Lately, I've been focused on paying down my student loan, putting any extra money towards that debt.
However, I completely neglected to save for a new car. Recently, I had to fork out $2,000 for car repairs, which was a frustrating realization because I haven’t been saving at all for a car—just saving to cover my insurance.
Now, my car is running smoothly again, but it has nearly 300,000 miles on it. I'm faced with a decision: should I pause the extra payments on my student loan to start saving for a new car, or should I continue as is and try to minimize my student loan debt?
Currently, I’m accruing $5.40 per day in interest on my student loan, and my monthly payment has been around $800, this includes about $500 extra a month. I'm considering reducing this to $360, which is actually my monthly payment and putting the rest towards a down payment for a new car.
A few months ago I had the new car itch, finally got through that only to be in the dumbs due to a breakdown.
I feel like I’m never going to get ahead of this debt, feeling down.
April 23rd, 2024 at 09:22 pm 1713907341
How much would a new car cost?
Would it be significantly more fuel efficient?
What would you pay in sales tax (if any)?
How much would your insurance go up?
Would you buy thru a dealer? What would interest rate be on a loan?
If you’ll buy privately, what would your interest rate and excise/wheel tax be?
What would your monthly cost net out too
It will cost you a small amount in lost interest reduction to save $2000 or so. If you can put money into a 5% HYSA or cd for 3-4 months you’ll minimize the hit on your loan interest costs.
I don’t know how you efund is banked - if it’s in a HYSA, just add $500 per month to it. If not, take $2000 from it to put it in a cd and pay it back $500 per month. (And look for a HYSA or to ladder your efund into CD’s - you would never need the full amount all at once)
Then start the research on the kind of car you want, what that will cost you.
If you decide to hold off, just put the $2000 towards the loan or hold on to it for your down payment when you’re ready.
If you decide to buy, limit your loan payment to $500 per month less the increased insurance/tax costs.
The student loan with theoretically take longer but you’ll have money you aren’t throwing on car repairs to put towards it.
I hate the uncertainty of a car breaking down more than slow but steady debt payoff. I wouldn’t go 4 years with an unreliable car and if you are going to replace it, it’s do it.
And don’t let any dealer into ‘must buy now to get this deal.’ Just gather information.
But that’s my priorities. You have to figure out yours.
April 24th, 2024 at 01:43 am 1713922997
Also, if it is possible for you to put your car savings into a high interest savings account or CD, that could help you to earn money faster, too.
Good luck! You got this!
April 30th, 2024 at 01:08 am 1714439295