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ST is Smarter: So next month is the final payment on my car lease and I go in to buy it out. Here's my options:

Posted by Name Withheld By Request (aka BlueKopo) Oct 23 '08, 09:35

The buy out is $7,100. Book value of the car is $8,500 and with my low mileage for a 2004 - 33,000 miles - worth more.

I can get a 5% loan through my bank unless the dealership beats that (I'm kinda sure they will).

I can put $1,200 down if I like.

Do I:

A) Put down the down payment, maintain my monthly $300 payment and pay off the car completely in about twenty months?

B) Save or invest the $1,200 instead, maintain my monthly payment of $300 and pay off the car in just over two years?

C) Take the bank's offer to stretch it to a five-year loan, pay $150/month, while upping my monthly RRSP contribution by the remaining $150?

I'm really leaning towards "C" right now because the market being as low as it is, I kinda want to put as much long-term loot into it as possible and over five years, I would have to think that my rate of return should beat the 5%. Plus, the low payment leaves extra flexiblity if I enter the housing market int eh next twelve to eighteen months.

Thoughts? Concerns? Other suggestions?

Responses:

Depends on how your residual buy out compares to the current value of the car -- nm - Scorpion Oct 23, 09:51 1
- and I obviously missed the first line.... - Scorpion Oct 23, 09:57
(Look to clear debt fast when economies go south, 300 a month in a few years time might inflict the same pain on your pocket as 500 a month does now.) -- nm - Loyola Oct 23, 09:49
if the monthly payment had been a little higher i'd choose that - DaneDukeNuuk Oct 23, 09:49
I'd say it depends specifically on your tax situation, and what kind of returns you expect on the RRSP, but leaning toward C. -- nm - mafic Oct 23, 09:49
A--you want to clear debt as quickly as possible on a depreciating asset -- nm - ceregon Oct 23, 09:44 2
- I agree, but if he trades up in the interim. He'll save himself with the other options. -- nm - budice Oct 23, 09:49
- Option E is to let the subscription expire, return the vehicle, and actually buy something. - Beryllium Oct 23, 09:45
unrelated, but regarding your post yesterday about the bloc: - mafic Oct 23, 09:44 2
- You don't feel it's not showing a disregard for the rest of Canada to continually vote for a party that only focuses on your province ahead of the... - Name Withheld By Request Oct 23, 09:51 1
  - I think that's exactly how reform started, when the other parties aren't willing or able to do what you want for your region, what's left? -- nm - mafic Oct 23, 09:53
with option C, you're paying about $300 more in interest charges over the life of the loan -- nm - znufrii Oct 23, 09:42 4
- which would likely be more than offset by the tax benefits of the increased RRSP contributions. -- nm - mafic Oct 23, 09:51
- with option B, you're paying just over $100 more. -- nm - znufrii Oct 23, 09:45 2
  - True, but with option C, he can invest a sum of money in a nebulous market, with a possibility of earning quite a bit of return -- nm - Beryllium Oct 23, 09:47 1
    - Or, the possibility of losing money as the market thrashes around some more. -- nm - TaurusII Oct 23, 09:48
D. Tear off all your clothes in the car dealership, set fire to them, and dance around them making loud whooping noises. - Loyola Oct 23, 09:40
A) you want to be debt free as soon as you can - colin Oct 23, 09:40
C sounds good. I would also consider possibly on trading for a newer car. -- nm - budice Oct 23, 09:40
get a bike -- nm - DaneDukeNuuk Oct 23, 09:39 5
- Got it. Used it quite a bit in the summer. That said, Winnipeg is a auto-city. -- nm - Name Withheld By Request Oct 23, 09:44 4
  - seen thoose new battery powerd bikes? - DaneDukeNuuk Oct 23, 09:48 2
    - I have actually. Cost is the big factor keeping me from a scooter (or better a motorcycle) in the summer. -- nm - Name Withheld By Request Oct 23, 09:55
    - ... here, let me link you to some historical weather info for Winterpeg. -- (link) - Beryllium Oct 23, 09:50
  - Ooh, right. That complicates things. -- nm - Beryllium Oct 23, 09:46
Other suggestions? Never lease. ;-) That said, I like the investment idea. -- nm - Beryllium Oct 23, 09:38 2
- The lease made the most sense at the time and actually worked out well. Lease offered much lower payment and a lower interest rate made it even-ish. -- nm - Name Withheld By Request Oct 23, 09:41 1
  - It's like a subscription for a car. Most people get stuck with it, so instead of buying the car after, they trade it in and get a new one - Beryllium Oct 23, 09:42
I'm leaning toward A - ty97 Oct 23, 09:38

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ST is Smarter: So next month is the final payment on my car lease and I go in to buy it out. Here's my options:

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