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Posted in Auto Loans
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jdh5253

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Plan to buy car after a lease
In 2012 I leased my first car and the lease ends next Fall. After the lease ends the value of the car will be $9,335. I'm deployed right now and will be making a decent amount of extra money and I'm trying to figure out what the best action would be to either help pay down debt or work toward buying my car at the end of the lease.

First of all, I have about $36,000 in student loans. I'm paying on most of them, but my largest loan (with a balance of around $15,000) is deferred until next spring. When I was making payments on it they were around $176 a month. I had it deferred in order to be able to afford to lease my car. I'm not sure whether or not I'll be able to defer the loan again, or get the payment lowered, but I am making a bit more money now than I was in 2012 so I could probably afford to start making payments on it in the spring if I absolutely had to.

I also have about $11,000 in credit card debt. My lowest balance is $400 which I intend to pay off while I'm deployed. The next lowest balance is around $800 and the highest is $3,500.

If I end up with around $2,700 saved up this summer I'm wondering whether it'd be best to pay down my lowest credit card and save the rest for my car, or try to pay down multiple credit cards. My third option would be to pay off my lease and work on saving money to put toward buying the car.

I'm not sure which is the best of the above options. My credit rating is around 631 right now (and rising) so I assume paying off credit cards would be the fastest way to get a better rating and a better chance on getting a loan to buy my car at the end of the lease. But wouldn't paying off my lease a year early also help?

Sorry if my question isn't very clear, I'm just trying to figure out the best option to pursue.

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Top Contributor
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Great Question

Complex scenario, my super-simple answer would be the pay down your highest-interest credit card account.  Don't focus so much on the balance on each account as much as you should worry about how much extra debt the companies are forcing on you monthly in interest.

Unless your interest rates on your credit cards are extremely friendly (less than 10%), then I would expect your future car loan to be lower than your current credit card debt.  Of course you'll need some cash for the down payment but there's no use in a bigger down payment on the car when most likely, the car loan interest would be lower than your current credit card interest is anyway.

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