Only serious ANSWERS please- no opinions to this question: we are leasing a truck and will pay the lease off?

Question

this next May. We want to keep the truck...plus we have gone so far over our miles that it wouldn't be wise for us to just give it back and we don't want to finance a vehicle. We have the money NOW to pay the lease off, but should we put that money in an interest bearing account, and take it out next May, while we continue to make our regular monthly payments on the truck from now till next May- or just pay it off now?

Answer 1

Auto finance is what I do for a living and Ginnie is correct.

Answer 2

When you purchased the vehicle you included the finance price (the interest) as part of your monthly payments. So whether you pay it off now or in may, you won't pay any differences in interest. My only concern is if it is a new truck and you get into an accident that totals your truck on a lease, then insurance pays the rest of your lease off.  If you get in an accident and are making payments to own the vehicle, then insurance will pay out the value of the depreciated value of the truck and not the amount that you owe, which most likely will be less than what you owe (unless you got gap insurance when you were in the financing office at the dearlership).  In the car buisness its called 'being upside down'.   Personally, I would put that money in an interest bearing acct or a 6 month cd at 2.7 percent, and use the accumulated interest as an additional down payment.

The interest you agreed to pay over a certain time period was a contract between you and the financial company. You will pay the full amount whether or not you pay it early or not. This is if you have a precomputed interest loan, which most people I sold to did. If you have a non precomputed interest loan then you might be able to save some money. You can tell if you look at your original agreement and if the interest is included in the total price, then you are paying a precomputed interest loan.

Answer 3

I say pay it off now. Whereas you may build some interest in a savings account it will never surpase the amount of interest accrued and payable by the loan by next May. Pay it off now.

Answer 4

Pay it off now.  If you put it in an account, the accrued interest probably would not add up to much.  Paying it off now also means you pay less interest on your lease.