Comments on: Reader Question: Pay Off A Car Or Put More Down On A House?

By: Don’t Forget Your Own Finances this Sunday | Credit Card Information

Don’t Forget Your Own Finances this Sunday | Credit Card Information — Mon, 29 Sep 2008 02:10:13 +0000

[...] Two Dollar helps his reader with whether she should pay off her car or put more money down on a house. I agree with David’s response. Do [...]

By: Double

Double — Thu, 25 Sep 2008 03:18:26 +0000

Pay off the car loan and put the rest of the money to the house.

By: MITBeta @ Don't Feed the Alligators

MITBeta @ Don't Feed the Alligators — Thu, 25 Sep 2008 02:15:40 +0000

I agree with Ashley #8 above. To use the money to pay off the car is effectively the same as financing the $12k balance over 30 years.

By: Improving Cash Flow vs. Accumulating Wealth | WealthBoy

Improving Cash Flow vs. Accumulating Wealth | WealthBoy — Wed, 24 Sep 2008 18:14:30 +0000

[...] a good example. Here’s an example inspired by a post David at MyTwoDollars made in which a reader asks whether to pay off a car loan or increase the down payment on a new home: My husband and I are selling our house and will be netting a profit of $52,000. We are building a [...]

By: Ashley @ Wide Open Wallet

Ashley @ Wide Open Wallet — Wed, 24 Sep 2008 15:58:12 +0000

If it were me I would put it down on the house. The reason being that the lower house payment (about $70 a month lower) will last for 30 years. In a few years the car is going to be paid off anyways and then you will have a paid for Tahoe AND a lower house payment.

By: My Dollar Plan

My Dollar Plan — Wed, 24 Sep 2008 15:52:40 +0000

It depends how you plan on financing the house. With a $52,000 down payment, you would only need to come up with $8,000 more for 20% down. If you reduce it to $40,000 available by paying off the car, you are going to be pretty far from a 20% down payment.

If you don’t put 20% down, it’s likely that you might have to pay PMI or use a piggyback loan at a higher rate. Would either of those outweigh the costs of the interest on the car? Something to think about.

By: Kyle

Kyle — Wed, 24 Sep 2008 14:53:46 +0000

Ideally I would say sell the car and buy a used compact, but if that’s not realistic I think it’s a no-brainer to pay off the Tahoe first.

By: Holly

Holly — Wed, 24 Sep 2008 14:30:16 +0000

I would definitely pay off the car, then I would make sure to have a good 3-6 month emergency fund, then I would put the rest on the house. What freedom it is to not have a car payment and to have money for anything that could come up. I don’t think you can assume to sell the Tahoe. You don’t know their situation and what their needs are. We have a Yukon XL and it isn’t anywhere near fuel efficient. We looked at Odesseys when we bought and at the time(2003) used Odesseys were the same price as a Yukon. The difference is the room. We have 5 kids and usually are carrying extras so the Odyssey would not have given any extra people room. But, having trunk space was the big thing. The Odyssey was small, like a trip to the grocery store alone would have been too much. We always have baseball bags and stuff that we really need more room. I don’t regret at all paying more in gas to have what will carry our family. We also wanted to be able to pull a camper and boat and can load heavy things with the seats down.

By: Llama Money

Llama Money — Wed, 24 Sep 2008 14:21:38 +0000

No question, pay off the car and put the rest toward the house. Well, that’s assuming they already have a solid emergency fund in place. If not, drop $20k in the bank immediately, and put the remaining $20k down on the house.

As for selling the Tahoe and getting a fuel efficient car, I’m on board with that too. But then again, that wasn’t the question posed Losing that fat $600 payment will do wonders for this couple’s financial situation.

By: David

David — Wed, 24 Sep 2008 14:14:58 +0000

Selling would be great, if you could sell used full-size SUV’s nowadays. The market has collapsed for them because of fuel prices.