I’ll try to keep this brief.
I have a 2017 Cadillac with 100k miles that I’m able to sell for $9,000 but I owe 25k(payoff amount) on it. Long story on how it ended up that way but being young and dumb contributed heavily.
The interest rate is 8% and the payment is $630 a month with nearly 4 years left on the loan.
I have about 20k of vested stock from my employer that I’m able to sell without paying short term capital gains. The stock I hold is very volatile and right now it’s valued fairly high. I’m contemplating selling the car for $9000 which is the best offer I’ve been able to get and selling stock to cover the rest.
I don’t use the car and it just sits collecting dust and diminishing in value and the money from the payment would be nice to have right now. I’m just curious if this is a good idea, it feels like it is to me but I’d like some additional opinions/advice if possible. Thanks in advance, feel free to ask for any more information that I may have left out.
Should I sell $15,000 in Long Term Employee Stocks to pay off a car loan?
byu/Secret_Conflict_175 inpersonalfinance
Posted by Secret_Conflict_175
15 Comments
Well that’s an expensive mistake. But yeah, getting on top of the water is advisable especially with an 8% rate.
Consider the impact to your taxes.
Locking in an 8% return and getting yourself out of a bad loan situation seems like a reasonable plan.
So let me get this straight:
You have a car that is worth $9k that you owe $25k on ($600+ per month!) that you don’t use?
Sell the stock and the car, and pay the car off. Immediately.
If instead of stock, you got a $15k cash bonus last week, would you use that to buy $15k of stock at the same company you work for, or would you use the money to pay off this awful upside down loan?
You have a car that you owe 25k on that you don’t use at all? Do you have another car already?
Sell the car and sell the stock to cover. Then take your $600/mo car payment that you are no longer making to pay down other debt if you have any, or contribute it monthly to a ROTH IRA and max out your annual IRA contributions.
Get rid of the car and pay yourself back by investing the payments. In 4 years you’ll have all the money back and all the benefit of profiting from the returns.
If the stock is traditionally very volatile and it’s near an ATH, and you’re going to be only paying long term gains on it then even without paying off the car, capturing the gains is not a bad plan.
Add in you’re going to lock in essentially a tax free 16% gain on top of that on total saved interest on an 8% loan over 4 years. (total interest still to be paid on the loan / remaining principal *100 [that’s why compounding interest on debt sucks so bad and why it’s so good on your savings]).
IMO it’s a no-brainer: liquidate the stock, pay off the car, sell it (if you don’t use it). Take the remaining funds and invest in VOO or similar to capture the market as a whole.
Cars are a cancer to Americans’ finances. These stories blow my mind
Depends on the company. If it’s a growth stage company then probably hold off. If it’s a slow growth company then may be a good idea. Could be worth way more than 20k. But I think taking 15k sounds like a good option. Could also try to recast the loan or get another loan from a credit union after paying it down. Or just sell it and get a 10k car like a Toyota or Honda. But if the cars fine most likely just recast then drive until you pay it off. Or stick with the 600$ payment after you pay the 15k down.
Depends. If you worked at nvidia 5 years ago this would probably be $150,000 now. Or palentir.
But ya, usually a good idea
Can you try to refi your loan or even consider selling the car and buying something with less harsh interest? Keeping that money in the stock market, making good decisions on where to invest it like an index ETF (VOO) or growth (QQQ) might grow to a very sizable amount over time.
Agreed with others here, sell the stock to pay off your car. I’ve read on here quite a few times that it’s not good to have company stock with the company you’re presently working for since so much of your present financial stability is already tied to them. In this case it seems you can kill two birds, divest from your employer and get rid of some bad debt.
You’d have a much higher rate of return by paying down some mortgage principal if you have one.
If not, then sure, pay the car if you think you can recoup that difference back into other investment strategies.
Having money from the payment would be nice right now??? This sounds like you’d spend this savings and now waste that extra money you’d have on other dumb things… Whenever you pay down debt, your goal of paying it down is because the interest of the debt is accumulating faster than that same amount of money earning you interest… 8% is toss up, Whenever you pay down the debt you are supposed to then start saving and getting into a better financial situation. It just doesn’t seem like you are ready to do that… So I’d first move that money into a more stable investment aka less volatile, and I’m simply keep making payments on the car, and if you want or can make extra payments. This will keep you from spending your savings, and stopping you from making another dumb financial mistake. I don’t see a Cadillac going under 6k dollars in 3 years and you might need the car more in the future than you need now… However if you were to pay this car off, do you see yourself saving the 19k in those years?