Does My Financial Decision Make Sense?

[joeb]

So, I took delivery of my '22 Wildtrak in late September this year -- one month ago.

I financed roughly 45,000$ @ 3.85 for 60 mo.

Now, I had a CD that was earning a measly .55 % and was not going to mature until Aug 2025.

So. I closed the cd (early and took a little penalty on interest earned -- negligible for this story)

I am in process of opening a cd for 4.25 apy for 60 mo.

Am I ahead in long run, even because of taxes paid on interest, or am I still losing?

Would like to know your thoughts.

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[joeb]

Oh. And do I open cd with same amount financed OR a little more to account for taxes paid on cd.

Thanks

 

[ChrisInSC]

I would consult a legit financial advisor. Message boards are great but I wouldn’t trust the idiots on here, myself included.

 

[Sonny]

Asking the internet for investment advice will make you poor

 

[hemiblas]

You will pay taxes on the interest earned for that cd. Depending on your tax bracket it could be 10 percent or 24 percent or higher if you make more. You can't write off interest for vehicle loans.

In order to answer this we would need to know you household income....writeoffs...etc.

 

[RagnarKon]

You didn't say how much the CD was for. But let assume it was also $45,000.

• Financed $45,000 @ 3.85% APR
  • Minimum Payment: ~$825.42/mo
  • Total Interest (loss): ~$4527.34
• $45,000 CD @ 4.25% APY
  • Total interest (profit): ~$10,410.60
  • Taxes on that interest: $????.?? (depends on your other income, your state, etc.)

 

[joeb]

You didn't say how much the CD was for. But let assume it was also $45,000.

• Financed $45,000 @ 3.85% APR
  • Minimum Payment: ~$825.42/mo
  • Total Interest (loss): ~$4527.34
• $45,000 CD @ 4.25% APY
  • Total interest (profit): ~$10,410.60
  • Taxes on that interest: $????.?? (depends on your other income, your state, etc.)

Thanks
I was thinking of doing cd. But that Profit sounds high ?

 

[joeb]

I

You didn't say how much the CD was for. But let assume it was also $45,000.

• Financed $45,000 @ 3.85% APR
  • Minimum Payment: ~$825.42/mo
  • Total Interest (loss): ~$4527.34
• $45,000 CD @ 4.25% APY
  • Total interest (profit): ~$10,410.60
  • Taxes on that interest: $????.?? (depends on your other income, your state, etc.)

I stand corrected. Yes, that is correct!!

Thanks

 

[MayhemMike]

If you have the $45K to either pay off the vehicle or buy a CD I would pay off the vehicle. Using the numbers earlier provided you do earn an initial 5-6K difference ,however, as mentioned there are tax implications and the value of the interest earned will more then likely be less when it matures. Both of these eat into that profit.

 

[0ne]

#1 you bought a new car
#2 you financed a lot of it
You’ve already made two financial mistakes so go make up for it by hooning around in your new steed

 

[st3v]

I would keep the loan - don’t pay it off. That is still a relatively low rate. Always better to have cash on hand for a rainy day. Economy may get bad next year.

 

[Shazamalingo]

#1 you bought a new car
#2 you financed a lot of it
You’ve already made two financial mistakes so go make up for it by hooning around in your new steed

You're statement #2 is patently incorrect. Any financial advisor worth their salt would agree.

 

[joeb]

I would keep the loan - don’t pay it off. That is still a relatively low rate. Always better to have cash on hand for a rainy day. Economy may get bad next year.

Yes, the economy is uncertain, and it is a relatively competitive rate. -- both for the loan and the cd.

 

[0ne]

You're statement #2 is patently incorrect. Any financial advisor worth their salt would agree.

Please explain, your statement without explanation suggests debt is good but I guess you’ll try to explain how the cash used elsewhere could make more money than the debt costs?

 

[Shazamalingo]

Please explain, your statement without explanation suggests debt is good but I guess you’ll try to explain how the cash used elsewhere could make more money than the debt costs?

If you pay $45k cash, that money is gone. If you finance it, especially with rates we saw until 6 months ago (such as 2% for up to 7months), all you need to do is beat 2% a year. If you do a CD, you win (by how much depends on a lot of facts). If you invest that over 6 years, you’re likely way up (index fund should get you 50-65% in 6 years historically).

As interest rates go up, your returns will vary. Investing in the stock market is not slam dunk.

So one cannot universally say that financing a lot is a poor decision.

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