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Keep Stock or Payoff Car?

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Established Member

Keep Stock or Payoff Car?

So here's the situation:

 

I received some stock in compensation for a layoff several years ago. I routed some of it into a retirement account, some into an emergency fund and left some in a general investment account. 

 

I used to have terrible credit (mostly related to medical bills and other unapid expenses due to trying to pay medical bills). This is almost entirely cleared up now but while I had a score in the low 500s I bought a car and have a lovely 14% interest rate and a car that I owe more on than it is worth. Because I am upside down, refinancing hasn't been a viable option.

 

I could sell that general investment account stock and payoff the car in full. It has been earning about 4 - 6 % annually so in the short term it makes sense to use this money to pay off a debt charging more interest than I am earning but in the long term (in theory) this stock should pay out more than the interest I pay on the car.

 

I am in a financial position where I can afford to keep paying on the car and meet my regular expenses plus save about 15% of my pre-tax income (in addition to my 401k savings), however I would love to not have this car payment because in the near future this car will be sitting unused when I move to another city where I won't need or want to drive. 

 

Thoughts? What would you do?

Message 1 of 16
15 REPLIES 15
Super Contributor

Re: Keep Stock or Payoff Car?


@Gaia wrote:

So here's the situation:

 

I received some stock in compensation for a layoff several years ago. I routed some of it into a retirement account, some into an emergency fund and left some in a general investment account. 

 

I used to have terrible credit (mostly related to medical bills and other unapid expenses due to trying to pay medical bills). This is almost entirely cleared up now but while I had a score in the low 500s I bought a car and have a lovely 14% interest rate and a car that I owe more on than it is worth. Because I am upside down, refinancing hasn't been a viable option.

 

I could sell that general investment account stock and payoff the car in full. It has been earning about 4 - 6 % annually so in the short term it makes sense to use this money to pay off a debt charging more interest than I am earning but in the long term (in theory) this stock should pay out more than the interest I pay on the car.

 

I am in a financial position where I can afford to keep paying on the car and meet my regular expenses plus save about 15% of my pre-tax income (in addition to my 401k savings), however I would love to not have this car payment because in the near future this car will be sitting unused when I move to another city where I won't need or want to drive. 

 

Thoughts? What would you do?


Pay off the loan. Now. That's money in the bank.

 

Your stocks can go down as easily as they go up.


Total revolving limits 719k (592500 reporting) FICO 8 scores: EQ 735 TU 782 EX 746
Message 2 of 16
Established Member

Re: Keep Stock or Payoff Car?

Thanks. That was my instinct but some little voice in the back of my head wants to believe that stock will keep climbing. But they could also crash any moment. 

Message 3 of 16
New Contributor

Re: Keep Stock or Payoff Car?


@SouthJamaica wrote:

@Gaia wrote:

So here's the situation:

 

I received some stock in compensation for a layoff several years ago. I routed some of it into a retirement account, some into an emergency fund and left some in a general investment account. 

 

I used to have terrible credit (mostly related to medical bills and other unapid expenses due to trying to pay medical bills). This is almost entirely cleared up now but while I had a score in the low 500s I bought a car and have a lovely 14% interest rate and a car that I owe more on than it is worth. Because I am upside down, refinancing hasn't been a viable option.

 

I could sell that general investment account stock and payoff the car in full. It has been earning about 4 - 6 % annually so in the short term it makes sense to use this money to pay off a debt charging more interest than I am earning but in the long term (in theory) this stock should pay out more than the interest I pay on the car.

 

I am in a financial position where I can afford to keep paying on the car and meet my regular expenses plus save about 15% of my pre-tax income (in addition to my 401k savings), however I would love to not have this car payment because in the near future this car will be sitting unused when I move to another city where I won't need or want to drive. 

 

Thoughts? What would you do?


Pay off the loan. Now. That's money in the bank.

 

Your stocks can go down as easily as they go up.


I second this.

 

You can also then choose to apply the monthly funds you have been paying on the car loan to then funnel into savings or back into investment account. 

Message 4 of 16
Established Member

Re: Keep Stock or Payoff Car?

That's the idea. I want to funnel the savings of not paying the car note back into savings. I don't need it to meet my regular expenses and it seems kind of foolish to sell stock only to blow through the money. 

 

This is mentally kind of hard to do because I like the idea of having that money there but I have to keep reminding myself that I don't need it, I have other cushions and the money is still there - it is just in a new form!

Message 5 of 16
Regular Contributor

Re: Keep Stock or Payoff Car?


@Gaia wrote:

That's the idea. I want to funnel the savings of not paying the car note back into savings. I don't need it to meet my regular expenses and it seems kind of foolish to sell stock only to blow through the money. 

 

This is mentally kind of hard to do because I like the idea of having that money there but I have to keep reminding myself that I don't need it, I have other cushions and the money is still there - it is just in a new form!


I echo the previous posters' advice...sell the stock and pay off the loan. 

 

Good luck to you whatever you decide to do! 

Message 6 of 16
Frequent Contributor

Re: Keep Stock or Payoff Car?


@Gaia wrote:

So here's the situation:

 

I received some stock in compensation for a layoff several years ago. I routed some of it into a retirement account, some into an emergency fund and left some in a general investment account. 

 

I used to have terrible credit (mostly related to medical bills and other unapid expenses due to trying to pay medical bills). This is almost entirely cleared up now but while I had a score in the low 500s I bought a car and have a lovely 14% interest rate and a car that I owe more on than it is worth. Because I am upside down, refinancing hasn't been a viable option.

 

I could sell that general investment account stock and payoff the car in full. It has been earning about 4 - 6 % annually so in the short term it makes sense to use this money to pay off a debt charging more interest than I am earning but in the long term (in theory) this stock should pay out more than the interest I pay on the car.

 

I am in a financial position where I can afford to keep paying on the car and meet my regular expenses plus save about 15% of my pre-tax income (in addition to my 401k savings), however I would love to not have this car payment because in the near future this car will be sitting unused when I move to another city where I won't need or want to drive. 

 

Thoughts? What would you do?


I follow Dave Ramsey, so sell all investment accounts (except IRA/401k) and cash out all savings accounts to pay off your debt. Do keep a small emergency fund. 

Message 7 of 16
Frequent Contributor

Re: Keep Stock or Payoff Car?


@Gaia wrote:

That's the idea. I want to funnel the savings of not paying the car note back into savings. I don't need it to meet my regular expenses and it seems kind of foolish to sell stock only to blow through the money. 

 

This is mentally kind of hard to do because I like the idea of having that money there but I have to keep reminding myself that I don't need it, I have other cushions and the money is still there - it is just in a new form!


Automatically transfer the savings to your other debt. It is called snowball. Once done with debt then automatically transfer to 401k/IRA

Message 8 of 16
Frequent Contributor

Re: Keep Stock or Payoff Car?

If you expect the stock to be a strong performer in the future, then don’t sell it. Is that 4-6% dividend or stock price increase?

Anyway, why don’t you use that extra 15% savings and put it towards the car loan. Or sell some of the stock, only enough to get your loan in the black, then refinance to a lower rate.
Message 9 of 16
Established Member

Re: Keep Stock or Payoff Car?


@Green456 wrote:

@Gaia wrote:

That's the idea. I want to funnel the savings of not paying the car note back into savings. I don't need it to meet my regular expenses and it seems kind of foolish to sell stock only to blow through the money. 

 

This is mentally kind of hard to do because I like the idea of having that money there but I have to keep reminding myself that I don't need it, I have other cushions and the money is still there - it is just in a new form!


Automatically transfer the savings to your other debt. It is called snowball. Once done with debt then automatically transfer to 401k/IRA


I'm lucky in that my car is my only debt now (other than student loans - ugh). The other debts that got me into a situation have been paid. When the stock is sold the car payment will be transferred back into investment accounts and additional savings. 

Message 10 of 16
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