Oblomov Boblomov wrote:jiggles wrote:Making a bit of a risky play here but (thanks to a windfall) I’ve *just about* enough in savings now to settle my car finance early, so I’m doing that this week. I’m only 5 months in to the 45 month PCP agreement so it’s certainly an extreme action cutting out 40 monthly payments PLUS the huge final payment, but it saves me about £6k in interest over the remaining term.
strawberry floating bricking it though. I should be able to build back up, but my mortgage is up this year, the energy prices go up next month when the govt support changes and I pre-paid a ton of gas before the price hikes (which is now running low), so my monthly outgoings will take a few jumps by the end of the year. The car payments being gone will hopefully offset the increases, but I imagine I’ll have to ask to extend the term of my mortgage when I renew to stop it getting silly. I have it down to 9 years so there’s plenty of “working age” to work with.
I’m sure I’d save much more money in the long term if I overpaid the mortgage instead of settling the car, but the ticking clock of having to come up with the final payment all over again by the end date or lose the car is something I’d rather avoid.
I know you've already addressed this speculative point, but if you put all the money into your mortgage instead, would it bring your term down to within 40 months?
With my car, I overpaid a big portion of the value required to pay off the installments and then left the balloon payment at the end. Its a bit of a halfway house.
Alternatively, you can pay off a lot of the final payment early and leave the installments in play.
Finally, I've put the rest of the cash I had into savings to offset the interest rates, which is a slight loss Vs paying off now, but gave me versatility on not buying the car at the end / dealing with other big expenditure.
Martin Lewis has a decent calculator for putting money in savings Vs overpaying your mortgage. I'm guessing your car finance costs more than your mortgage in % so is probably the better cost to target.