Saved up about 200k, should I pay off my vehicle finance or invest instead??

[callin_on_ya]

Hi everyone!! First time poster here and I was hoping to get some advice.

I recently purchased a brand new vehicle and received finance through VW financial services. I’m a first time buyer and was rejected for financing from major banks even though I have plenty of savings.

My current interest rate is 16.25% (I know it’s high) but I accepted it because I wanted the vehicle and figured that because I’m a first time buyer, I would probably have to accept what I get to build up my credit score further. As per the title, I have about 200k saved up split between an fnb savings account giving me 7.7% p.an and a Tymebank Goalsave that’s currently 7% p.a which could go up to 11%.

Did I make a mistake and where should I go from here?? If you suggest investing, please recommend good investment accounts.

thanks so much for the help and god bless!!

 

[hazrus]

@callin_on_ya In general keep some in savings in case of emergency, and put the rest towards the car. If you keep 50k.puting the other 150k into savings for the next year would earn you, about 11k in interest income, not paying it into your car will cost you about R24975 in interest expense

 

[donald_allan]

@hazrus and putting in 150k will save +- R3k on monthly installments (if it was done over 72 months) if OP chooses to reduce monthly installment instead of the term

 

[callin_on_ya]

@donald_allan Thank you, the lower monthly payments is something that I never considered before and I think that’ll help me make a decision as the extra monthly cash flow will help me increase my savings/investment.

 

[truthseeker52]

@callin_on_ya Pay off the car. You're effectively saving yourself 16.25% on interest paid. Unless you can guarantee an investment above 16.25%, you may as well pay off the car.

 

[resjudicata]

@truthseeker52 Interest plus tax. So for many, close to 30%, which you can get nowhere. So yeah, pay off the car.

 

[soikeobongda24h]

@callin_on_ya Paying of the 16% debt as apposed to earning 7-10% interest that also gets taxed if you go over your 23k interest exclusion per year (I assume you under but worth remembering) doesn't make sence .

Always try avoid debt or pay extra to higher interest rates first .

 

[lostbutfound85]

@callin_on_ya Depends on your objective:

1. If you're interested in not losing any more money, pay off the car to avoid paying the 16.5% interest. Probably improves your credit worthiness to borrow some more for something else, or you can start putting away the value of the car payment into savings.
2. If your objective is healthy cashflow and liquidity, then invest the money and continue as-is with car payments. You can use the earnings to pay off the car, other expenses, or better still save. This ensures that you access to the money in case of a dire emergency.

If I had a word of advice for my younger self, it would be SAVE, SAVE, SAVE!!!!

 

[travis99]

@callin_on_ya Put 50k onto your vehicle, R100k into Bitcoin and 50K for a rainy day.

 

[callin_on_ya]

Thanks to everyone who provided some much needed insight and advice, appreciate all of you!!