Saturday, January 23, 2016

To finance or not to finance

That is the question, at least since we started the search for our next vehicle.  I'm not a huge fan of paying interest but alas it is one of the necessities of life unless you're like the people who bought our last house and had an uncle front them the money.  That said, I've been approaching the car decision from a couple of angles.  First and foremost being realistic about how much time I'll have to fix stuff in the coming months/years (as well as considering where my time might be better spent even if I have it) as well as my tendency to be preoccupied with things (squeaks, rattles and other potentially broken stuff) which leaves me distracted from what's important and what God wants for me.  The second you can probably guess if you've read anything else here: traditional number crunching.

As I mentioned here, we have a student loan that's been hanging around at a pesky 4.25% interest rate and were quoted a much lower 1.85% for an auto loan.  Now obviously we'd be trading tax deductible interest for interest that is not, but the almost 60% delta between the two rates makes a pretty good case regardless.  Thankfully we live in an electronic age full of handy (and hand-held if you're old school) calculators so it's pretty easy to crunch the numbers.

First up, I used's auto loan calculator to determine the cost of a $15k loan on a used van vs. paying cash (an option still pending a liquidation sale of a few vehicles):

Next up was determining how much interest we'd save applying that same lump sum to Mr. Student Loan using Regions lump sum calculator:

I'm still evaluating and trying to shoot holes on the numbers and logic, butthere seems to be a pretty compelling case (even with tax and calculator accuracy assumptions) that a car loan is definitely worth pursuing and any cash resulting from vehicle sales will make a big impact in student loan savings (almost $2k) and will allow us to meet our goal of paying the previous generation's education debt prior to the current generation's entry into the collegiate world in 2018!

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