The plan is done and set in place! I am happy to finally get on the right feet and automate the plan as well.
The Auto Loan Payoff plan
The details of the plan, eh? Well, it will be very easy. I didn’t want to deploy all of my capital, as you can tell from my article on what to do with my idle cash a bit ago. However, I wanted to use my capital to put me in a better situation financially and sooner, than later, of course. I mean, c’mon – we are on this pursuit of removing as many shackles as we can, and this was one set of shackles that I didn’t want to have on my wrists anymore!
I had, after my April payment, approximately $6,105 left on the auto loan. I knew for sure I wanted to be rid of the loan by end of December. However, I didn’t want to zap up all of the capital right away either. Instead, what I plan on doing is allocating extra payments evenly over 6 months and by the end of September, this loan is… OUTTTTA HERE! This preserves my capital for other opportunities and I owe a painful amount of money for my local taxes that just came due. The capital I’ll have remaining going forward should allow for investment purchases, mortgage debt paydowns when necessary or other investment ventures.
Reasons I am paying off my auto loan
1.) I own a Honda Accord and it currently has 99,600 miles on it. Still a baby in my eyes and I plan on driving this car for the next 150,000+ miles if I am able to. I have reduced my average miles driven per month due to introducing rental cars into my traveling for work (this is reimbursable), which is helping in prolonging the life of my car. Further, since this is a Honda, it does have a higher chance of lasting longer, as long as I keep up with routine maintenance, i.e. oil changes, breaks & tires. My wonderful girlfriend has helped, as well, in driving more to my house occasionally, now that we’ve been together for quite some time – I let my chivalr-ic guard down and am okay with her doing this! I am estimating now around 9-10k miles going forward, so if we do my math – we are talking 10+ years remaining. Let’s go baby Hond-ooni!!
2.) This will open up, at a minimum, $284 in cash flow extra per month. I would have had to wait until February of 2019 to achieve this cash flow, therefore, why not now? If this loan was bigger – I may have second thoughts to it, but an extra $284 per month would be nice, psychologically, going forward. This is just the auto loan payment. Once paid off, I plan on contacting my insurance agent to tell them my car is no longer-financed and is owned by me. I’ll have to see if this has any impact, as I know it may not, because I already have high deductibles. Will be worth a shot, regardless.
3.) One less thing. I know this is ridiculous but it is one less thing to worry about. One less person placing their hand in the financial freedom jar, it’ll be gone. One less bank I have to log into to see if my payment actually made it there – I know, I’m OCD. However, just the sheer clicking of the button – “remove” from my favorite bar, on my web browser, will be awesome. One less debt on the balance sheet/net worth statement.
4.) Slight interest savings. Though my interest rate is very low at 2.29% – yes, very low on a used 2010 Honda Accord – I will save around ~$180+ in interest costs. Not anything that will push me over the edge to financial freedom, but is another benefit to getting rid of the loan.
5.) Depreciating Asset. The car is depreciating, typically, each month that I own it. It irks me even knowing I’ve been paying money on something that goes down in value and since I don’t drive for a destination service provider – provides no incoming cash flow to me. Some may argue – if you didn’t own a car, you couldn’t be in the profession you are in. I laugh at that, as it’s not even close to being true. However, I digress. The car is depreciating and I’m tired of making monthly payments on that.
6.) Does not add much value/pleasure to my life, currently. The car, lately, does not add any fun/flavor to my life. I rarely take it out for a summer drive to take in the breeze or take it out just to calm my mind. I know this is due to the countless number of hours and miles I have driven for work (I am talking – 8 hours in a day, the occasional 19 hours in a car in two days or just your 3.5 hour roundtrip commutes to clients), has made me feel disgusted with driving. Similar to my article – cut back on the things that don’t add value. Sadly, I’m not counting it out, but I am saying screw you to the debt that is tangled with something that doesn’t add much value currently.
Paying off the car summary
In the end, I am saving interest, time for checking on my loan, will slightly improve the net worth statement and will improve my cash flow “feel”. I am looking forward to improving my net income margin on my net worth, as one liability that doesn’t produce cash flow will be removed! I am also really looking forward to the psychological effect of not having an auto loan payment, as for the last 3 years almost, I’ve had one. Get that crap out of here! It’ll be great knowing that $284 per month will be available sooner than later.
What do you guys think? Smart to pay off my Hondooni? How far has your Honda Accord been able to drive you? Always curious to see how many miles others have been able to rack up over time! Tough place to use capital, but this isn’t the worst move by any means and may not be a home run either, but it puts me in a better financial situation, regardless. Would love to hear your feedback. Appreciate you stopping by to see my elbow drop this debt! Talk soon and Go Cavs!
-Lanny