Partial paying off Tesla (black horse) financd

[Epico]

Has anyone overpaid on their Tesla finance? With interest rates in the toilet for savings currently what are peoples opinions on paying off some of the car loan? As an example if you have 5k sitting in an account earning you naff all, surely the better option would be to put that towards the car finance and reduce payments (and outstanding credit).

Has anyone had any experience of this? I've never had car finance before the Tesla so am I missing something obvious that would make it not worthwhile?

 

[Epico]

Obviously I mean finance and not financd...can't correct a thread heading!

 

[P-plates]

From what I can tell with black horse the Interest is pre calculated, so unless you are paying the entire balance it doesn't get adjusted. (you won't save anything just be in credit). If you pay the entire balance they will give a rebate of some of the interest. (You can see this on their website when you look up your account)

I am saving to pay off my loan early seperately from overpaying, this works as a rainy day fund until I am ready to settle

 

[Elsig]

If you don't need it immediately you could invest in an ISA..Maybe a few shares in Tesla??
Over time that should return to you much more than the interest rate on your loan. (not professional advice as stock market can go up and down).

I took a loan through Tesla finance (not Blackhorse) over the longest period possible. Purely because I calculate that I will get higher return over the next few years from the stock market than what I would pay in interest on the loan. The loan is 3.9% and average stock market is around 10% per year l. Of course, some years it's down others up but on the whole its up. If, for whatever reason the stock market is lower in 5 years than it is now...There's other things we need to worry about

 

[my3nme]

If you over fund the repayment then the interest element is adjusted down. Although I think like most loans the interest part of your monthly repayments is front loaded. You end up paying a larger proportion of the interest to start with.

You can give Blackhorse a call and they will tell you how much your new monthly payment will be and how much interest you will save, just a pity this isn’t available online. The other week I had a 40 minute wait I order to speak to someone but they were very helpful after I asked them for figures to repay a lump sum early.

 

[gangzoom]

The loan is 3.9% and average stock market is around 10% per year.

If your so confident of 10% returns why didn't you take out additional mortgage borrowing which currently is at sub 1.5% fixed versus nearly 4% on a car finance product??

Using mortgage borrowing to make large purchases is currently by far the most sensible financial option for virtually anyone not looking to pay cash.

If you were really brave and sure you can beat 1.5% returns, you can use the additional capital to invest in the market........Ofcourse get it wrong and you might loss your house. But for something like a car loan, where you would borrow money anyways its the cheapest option.

 

[Elsig]

If your so confident of 10% returns why didn't you take out additional mortgage borrowing which currently is at sub 1.5% fixed versus nearly 4% on a car finance product??

Agreed, and I have done that as well. And yes, I could lose the house if the market totally collapses and doesn't recover within a year.

Without going into details I've calculated for most scenarios, but you are absolutely right, it COULD backfire with a sustained significant downturn in the market.

 

[gangzoom]

Agreed, and I have done that as well. And yes, I could lose the house if the market totally collapses and doesn't recover within a year.

Gosh you are a brave man putting the roof over your head on the line!! What kind of returns are you aiming for to make the risk worth while?

Hope it works out!!

 

[Elsig]

Aiming for 10%. In the recent years it's been 20% (much thanks to Tesla!!) but I don't expect that to last.

Just to be totally, clear, IF the house was lost (and that is a massive, big, huge if) there's still enough equity in it to buy another, MUCH smaller house or rent until the kids move out and my pension plan kicks in.

I don't reccommend this approach to anyone, but to me it makes sense.