[USER]

My car payment is $900 a month for 6yrs. If I set it to pay $225 weekly, will it save me money?

I also recall hearing from the finance guy that I can choose to make extra payments but let them know I’m paying toward the principal.

If not, would extra payments go to the interest instead? I’ve heard about doing something similar with mortgage payments.

[David]

No disrespect intended but $900 a month for 6 years is a great way to flush your income down the toilet and NOT reach FIRE.

[Camille]

To basically answer your question, yes- pay any extra $ you have toward the principal.

[Thu]

Be easy on the OP, we were all new at some point, made some mistakes, and we all had to learn the hard way.

OP, just FYI, most people who reach FIRE don’t give flip about what others think about what they drive.

As long as it’s safe and reliable, that’s all that matters. Sell the car and get a more practical one stat!

[Daryl]

If you add anything to your monthly payment, ensure it is marked as principal or else, they may just assume you are making next months payment.

However, id sell that vehicle. $900/month car payment to include the other costs such as fuel, maintenance, etc for a depreciating asset is far too much.

[Jamie]

We don’t know the finances of the OP to make judgements about how much this payment is in relation to their income.

They could make $1M a year which is about $60k/mo after taxes.

$900/mo when your making $60k/mo is more than reasonable.

Also, with the way car prices are now a ford 150 could very well be $50-60k or $900/mo

[Christopher]

$900 x 12 months x 6 years =
= $64,800 That is a lot!
As to your question, you would need to talk to whomever you are financing the car with.

Then do the math. The longer they have you paying, the longer the compound interest is working in their favor.

Consider a 3 year loan.

[Richard]

My last car payment was through Wells Fargo. I had auto pay setup monthly. And paid $130 extra per month.

The extra went straight to the principal helping it pay down faster.

[Jake]

I’m making some assumptions here since I don’t know all the variables but if you had the full 6 years left on the loan and a rate of say 6% or so, you’d pay off the loan about 6 months ahead of schedule and save about $1,000 in interest payments by doing this.

[Sarah]

It better be a Toyota or a Lexus. That you keep FORVER. If not that’s insane. Cars will keep you middle class and are the death of FIRE

[Janet]

When I was doing this is just made my normal monthly payment. I called them and talked to them about the principal payment and there was a different address I sent the principal only payment to.

[Dennis]

my humble opinion.. Sell the car and get a car you can afford

I drive a 11-year-old car with 225,000 km and I will drive it until it blows up and then I will buy another used dependable car with cash and drive it until it blows up

I am 54 and I’ve owned four cars in my life

[Rehman]

I believe not everyone here understood your question.
Per my knowledge (of my auto loan),

Your monthly payment of $900 cannot be divided into 4 payments of $225. It must be paid in full as $900 monthly.

Anything above the $900, which you pay off can and should go towards the principal and lead to decreased interest payments over the life of the loan.

I hope this answered your question.

[Alexa]

So, when I buy a car I do choose to buy new (which a lot of FIRE members disagree with). I do so because car maintenance issues give me instant stress and heartburn, buying new allows me to maintain my car how I want.

That being said if I finance I do so for 0% and the highest monthly payment so for example $1000 a month for 3 years 0%.

That way I don’t have to worry about the payment. What was your interest rate?

With financing I can keep the money in the bank and earn interest as well which is nice.

[Weston]

In conclusion far as saving interest making multiple payments a month versus one lump payment it depends on how your loan is structured.

[Fewee]

Yes tell them to apply to principal to bring it down less so less interest is accrued the next month

[Brenda]

It’s going to depend on the loan agreement. Some will hold the payments until they receive a full monthly payment, some are monthly compounding only, sone will compound daily.

The one advantage would be roughly one extra payment per year but make sure to mark the extra as principal only.

[Andrea]

Hope it’s a motor home, that’s a great price for rent and transportation combined.

Each lender is different: I tried to pay my mortgage weekly to save interest, they did not apply it to the balance until the first of the month= waste of time.

Check with the lender.

[Sydney]

You can make an extra payment towards to principal to save on interest

[Rikhi]

$900 a month for a depreciating asset!

A lot of folks will say – sell the car and buy something affordable

If you put the same money in a index fund, you will walk away with $100k at the end of 6 years!

[Ryan]

1. It might save you a little because you are paying 1/4 weekly payment early than 1 time a month.

2. Yes, it will go to interest if you don’t specify to the principle, same concept with home payments

3. What the hell did you buy for $900 a month?

[Sarah]

Could afford an expensive car. Drive my shitbox and a motorbike. Never, if you can avoid it, finance a car. Jus flushing down money.

Why you need something so expensive and new?

[Kathryn]

Yes. You would pay it down a touch faster (depending on interest rate) which isn’t a bad idea since your car payment is similar to some mortgage payments.

[Author]

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