Dilemma: Payoff car or student loan first?? Liability vs Full coverage??
 

So I have a 2014 fr-s with about 40k miles. 12k still financed at 2.7%.

Student loans are about 4% interest average. Owe about 22k..

Full coverage is about 140$/mo for me.

If I pay off the car and drop to liability it may save me more money than paying off half my student loan?

Is full coverage worth keeping?? considering I have a high deductible.. 1.5k I think

I'd keep the insurance. If you're still paying off student loans and they are for your education, you're prbably younger than some of us and may, I repeat MAY, have more of a tendency to get friskier than you should with the car. That said, conventional wisdom (and on this score I'm pretty conventional) is to pay off the highest cost debt first. Assuming you don't carry revolving credit card debt, I make the student loans a priority.

That's the same advice i give to sons #1, and #2.

I scraped this off the Interweb:

"To fulfill Alabama car insurance laws, you must have liability insurance to help pay for any damages or injuries you may cause to others in a car accident. Your liability coverage must include the following minimums: $25,000 for bodily injury or death per person."

I suggest you do some more homework .......;)


humfrz

hum, when he mentioned the highish deductible, I think he was referring to comprehensive. I know Ludwig has folks ready to pounce, I don't think this case warrants it. :cheers:

Yeah I have to keep liability but it's like 60$/mo vs 140$

12000 * .03 = 360/ yr in interest

Switching to liability saves me 960ish a yr

So 1200 ish a year I will save if I did that right.

The entire student loan 22000 * .04 = 880 a yr?

Deductible for comprehensive is 1.5k..

Switching to liability only "saves" you money if you don't consider risk. Drop collision, wreck your $15,000 car and it just cost you $15,000 in a few seconds.

I keep collision on all my vehicles (most of which were purchased for cash, and all of which are paid off) because I'd rather pay someone else to carry the risk.

The difference between a 3% and even a 10% loan isn't your problem, it's getting rid of the total debt. Pay off the lowest balance one first, then roll that payment into the other and pay it off early was well.

That's what I would tell my kids anyway.

There is a very good tool to answer such questions.
https://www.casio.com/resource/image...c-fx-991ex.png

Haha ikr. It's not that simple. Due to the insurance part of it.

Just looking for opinions.

Another factor is the car payment is higher than the student loans due to the term. Which would free up more cash?

Trying to to the smartest thing here.

I know, funny huh?:)

your lender is most likely going to require FULL coverage on your car... you would be foolish to drop full coverage anyway... can you afford to throw away 12k if something happens? I know hindsight is 20/20 but there is a reason a lot of people try to steer college students away from having a car payment.

Did not read full post.

Yes they require full coverage unless I pay it off.

I'm graduated and lucky to have a good job.

Yes I agree risk is a valid point/factor

No revolving debt whatsoever.

Do you have the ability to fix or replace your car on your own if an accident happens? Or what if someone steals it? Or what if a tree fell on it?

If you don't, keep full coverage for your primary vehicle.

Is student loan interest tax deductible? I can't remember. If so, I'd pay off the car.

How about a meteor strike :bellyroll:

It is but it's only a% I think. I don't think it saved me much last year filing.

Edit: it subtracts the interest from your taxable income.

So it would mabe save 200$ in taxes

That would be unfortunate but probably worth the 15k for the story. If comprehensive even covers that lmao.

One option is keeping full coverage and just paying off the car.

Yeah, I would only regret not playing the Powerball if a meteor strikes my car :lol:

At some point in your life, probably past 25 or 30, you will realize that saving money by going to liability-only on your coverage only works if the car in question is a secondary or weekend car. Otherwise, driving a liability-only car is just asking for your out of pocket expenses to skyrocket when an accident or theft does happen.

Liability only policies work when you have some type of backup plan or cash saved up to replace/repair the car.

I'm far too lazy to do the math nowadays, so I'll defer to yours.:thumbsup:. Maybe I should have said that the tax deduction COULD work out in OPs favor.

But that's 200 plus what OP won't be paying a year for the auto loan, vs just the student loan. Depending on the monthly payment (which in turn depends on a lot of things) it might be better financially for the OP. Obviously OP would have to do the math with actual numbers to find out.

Assuming I make no payments. The auto loan interest cost 360 a year.

The TOTAL student loan cost 880/yr - 200 in tax deduction. So 680.

If I played off my car saves 360 this year.

If I pay off 12k of the 22k in student debt saves about the same I think???

If a meteor strikes your car will be the least of your worries (or I suppose you will have no worries at all)

Unless it is one of these:
http://www.jumpingfrog.com/images/ep...1/ppp5267c.jpg

There are at least 6 tales of woe where somebody cancelled their collision and then got hit on this forum alone. It is a false savings to not have it.

I wouldn't let a tax deduction figure too heavily into the decision. Basically the way a tax deduction work is you get $xxx to a bank so that the government will give some small percentage of that money back.

For example, if you are in a 25% tax bracket (to make the math easy) and you pay $100 of interest towards your tax deductible student loan, you will owe the govt $25 less in taxes for the year.

Conversely, if you don't have loan, you'll pay $25 additional in taxes, but you get to keep $75.

I know which one I prefer.

Do you have the cash on hand to pay off the car? The way to pay off debt is to look at the total amount you owe, and like Dadhawk said pay off the lowest amount first. Having one loan is better than having two.

And keep full coverage on your car. It just takes one unlicensed uninsured driver wrecking your car and you lose it all if you don't have full coverage.

Most car dealers wont even let you take a car from their lot without full coverage insurance. I'm only 18 and that was a huuuge factor in getting my car when i was in the market for it.

I don't think there's any reputable dealerships that will finance you a car without full coverage.

also,OP,don't for get that the older you get,the cheaper your insurance will be. Assuming that you don't make any significant claims.IIRC,here in Illinois,after age 23~24,you would see a noticeable decrease,then decreases after every three years or so until you are about mid 30's,or something like that.

Yea but be honest, insurance for this car is insanely high.

Depends on who and where you are. I pay less for this than I did my Lancers. The wife's new Impreza cost more. I doubt that it is much ore that slightly above average for most people. It is individuals that cost more for insurance not the car.

part of that is true, part of it is the state you live in too. Or country in Canada's case. Then again my other car is a 2007 Yaris.

How can you decline collision on a financed car?
Like others said, you don't have a choice.

You want to do the smart thing? How in love are you with this car?
What do you think about selling it, paying down your student debt, and driving a beater for a few years?

well id pay the highest intrest on off first, then work on the second. but thats just me. In canada we have a really different student debt structure, its still highway robbery but they wait till your out of school and give you a six month grace period before you have to start repayment. I would suggest looking at your option with more scrutiny before making that decision.

Also keep the coverage, I literally couldnt begin to tell you how many people i know who wished they did. for reasons that were deemed their fault by insurance but were not.

Remember kids the bank and the insurance company arent your friends.

they will take turns bending you over any chance they get.

also @why? I love your pic. I am watching kenshin right now to be honest.

You didn't read

always pay off ur highest interest rate first. thats basically it

That six month grace period isn't real because they accumulate interest on each of those months while not having to make payments.

best thing I've read all day.

Reflects the caliber of your reading choices.

Says the person who couldn't read the original post properly and answered the question completely out of context.

Tell me, what part of your answer was relevant to OP? He only considered moving to liability only after paying off his car, which he stated in his post.

Tell me, smart one...

Student loan and pay it off asap, so the 4% on 22k won't hurt you for that long compared to half of the money and half of the rate. Don't get confused because you have to pay more for the car loan than the student loan.

You get the insurance coverage for what you're paying for, so I wouldn't say $140/mo is a total waste. Nobody knows what's going to happen.

It's just my opinion, I don't have the right to tell you what to do lol