If you read my December mini-goals post, you'll have noticed that we bought a new van. Brand new. Less than 50 km on the odometer when we drove it off the lot. The 2013 model. Really, really new.
So here's the breakdown.
The total price of the van before financing, but after trade-in allowance, deposit and discounts, including taxes and assorted fees, was $31,775.25.
It is financed at 4.9% per annum over a period of 96 months. The total cost to borrow is $6104.43.
That leaves the total amount to be paid as $37,880.64.
We had to sign that we would be making monthly payments of just under $400 ($394.59 to be exact) but really want to split that into bi-weekly payments of $200. We can do this, but have to wait until after the first monthly payment has been made.
The good news is, the loan agreement does not have any sort of penalty for paying the loan off early or for making any additional payments over the life of the loan.
With the current/original repayment schedule, it will be fully paid for in November of the year 2020. I'm so not OK with that.
If we put an extra $600 per year (that's $50 per month) toward the loan, we can have it paid off in November of 2019, which is 12 months early.
If we pay an extra $1200 per year (or $100 per month) toward the loan, we can have it paid off in February of 2019, which is 22 months early.
Hubby and I will be spending the next couple of weeks figuring out how and when we will be paying down the loan faster than the original schedule. I know that paying it bi-weekly will also pay it down faster, but I'm not sure how to calculate that. Can some one recommend an online calculator that can do that? Now that I've had a taste of being consumer debt-free, I want to be back there.
My reasoning for incurring new debt is because a van is necessary for producing an income for me. My justification (rightfully or wrongly) is that the difference in fuel costs alone should be enough to meet the new payments. I still have to find out what the difference in insurance costs will be.
After the end of this month, I will be setting aside $1000 (already budgeted for) as a buffer in the account that the payment will be coming out of. That way, if we are having a difficult month (or two) we have enough already set aside to meet our obligation. I cannot see this happening, but one never knows, right?