I am trading in my old car to purchase a new one, I will be getting a loan regardless of what I do but from my perspective, I have 3 options.
Background: Old Car Trade-in Value is $25k (fully paid off no loan on it), New car Purchase price with Taxes and Title rolled will be around $58k. With that being said a 48-month monthly payment would be around $1300/mo at around 5% with total loan interest being around $6100 after the full term. My budget for a new loan at 48 months is $1500 a month so this is well within my affordability.
Now back to my 2 options:
I can take the $25k trade-in value and take the cash, and invest it in the S&P500.
Or…
I can put the $25k towards the new car, and reduce the monthly payment to around $700/mo, then since I was “planning” to pay $1300 anyways, I just take that and invest the difference of around $600 each month for 48 months into the S&P500.
Or…
I can put the $25k towards the new car, and reduce the monthly payment to around $700/mo, then since I was “planning” to pay $1300 anyways, I just take that and put the difference of around $600 each month for 48 months into the principal payment instead and pay off the car loan even sooner by almost half. Which would in return reduce the interest I would pay. (not a real investing question unless we look at saving the interest and putting that up against market returns of 2 years to see which would provide more value)
My questions are…
Any other options I am missing?
If not…out of these 3 which is the better option?
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