Unpopular opinion: paid off my car loan early vs investing the cash

Last year I had $8,000 saved up and a car loan at 4.5% with 18 months left. I decided to pay it off early instead of dumping that money into my Roth IRA. On one hand, getting rid of the monthly payment felt amazing and freed up $380 a month for groceries and savings. On the other hand, I missed out on some solid market gains since then. What would you have done if you were me?

2 comments

2 Comments

emery1910d agoMost Upvoted

Gotta disagree here. A guaranteed 4.5% return with zero risk is nothing to sneeze at, especially when you factor in the peace of mind from killing a monthly payment. You did fine, the market just happened to go up while you locked in a solid win.

averywilliams10d ago

I get what you're saying about "nothing to sneeze at," but is 4.5% really that big of a win when inflation is still hovering around 3-3.5%? After taxes on that interest, you're basically breaking even in real terms. Plus, killing a monthly payment sounds great until you realize you lost all that liquidity. What if a real emergency hits next year and you need cash? You can't exactly call the mortgage company and ask for that $20k back. I'm just not sure trading flexibility for a 1-2% real return is this no-brainer you're making it out to be.