Car Mindset Shift Thoughts

Thanks everyone who gave your thoughts and breakdowns. It was really helpful in my decision making process to bounce ideas off of the collective. Have decided to keep the car❤️

Your idea isn’t crazy—but let’s break it down with a clear thought experiment.

Selling investments to cover a $13,000 loss on the ID4 and free up the $732 monthly payment sounds attractive when cash flow is tight. But there are a few key factors to weigh. First, your car loan is at 2.5% interest, which is exceptionally low. In most cases, investments—whether in the stock market or dividend-paying assets—have the potential to grow far faster than 2.5% over the long term. If you liquidate investments to pay off the car, you lock in both the car’s depreciation and the opportunity cost of compounding that capital in higher-return assets.

Warren Buffett often reminds us that cars are wealth leaks, not because of the price tag but because of the money tied up in a depreciating liability instead of a growing asset. From that lens, selling investments today to eliminate a cheap loan may save cash flow in the short term, but it risks sacrificing far more in long-term growth.

A better play may be to keep the cheap loan in place while reworking your broader budget so that your investments can keep compounding. That way, you maintain both your “goalkeeper” (financial safety) and your offensive strikers (growth assets) on the pitch. Over time, rebalancing your portfolio once or twice a year ensures you stay aligned, trimming back equities when they run too hot and using stable assets to buy when they’re on sale.

So, is it “crazy”? No. In fact, reducing a $732 monthly liability could bring peace of mind and improve flexibility. But from a wealth-building standpoint, the true cost of giving up compounding to pay off a 2.5% loan may be much higher than it looks.

I actually wrote a full blog post on this very topic—“Thought Experiment: The Real Cost of a Car”—which dives deeper into leasing, financing, cash, and even a dividend strategy inspired by Rich Dad, Poor Dad. You can see the full analysis, complete with tables, charts, and comparisons, on my blog at Simpli-FI.money

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Simpli-FI.money | Thought Experiment: The Real Cost of a Car - Simpli-FI.money

Good Luck!

Coach Holdren

SeanBOS...

Here are my thoughts on the situation you described.

To recap, you own an ID4 that you still owe $36,780, while the car is worth ~24,000 (negative ~$13k). Your argument is that the $732 payment can be better utilized on your other priorities. But to pay off the loan you'd need to pay this from the investments you already have. Which I assume will create a potential tax liability from selling these assets. (You might be able to control the tax liability or minimize this cost). Your loan is at a 2.5% interest rate.

My thought is: Keep the ID4, pay-off the loan. Don't "raid" your investment account which most likely earns you more than the 2.5% interest rate you're paying on the ID4 loan.

From a "financial analysis" perspective, your ID4 loan at 2.5% and the $732 per month cost is a better use of your money, than paying it off using assets that are most likely earning much more than 2.5%. It's better for you to keep the money in your investment accounts, and continue to "squeeze" your budget and forego buying the other "more important" things.

This is a good lesson for your future self. When you buy a car or home, you're making a long term commitment of your future earnings. If you can make it to the term of the loan, at the end of the term, you'll have $732 per month income you can then decide how to best allocate.

While the car loan is "squeezing" the money you could spend, it is also preventing you from increasing your living costs. Learning how to "make it" with the $732 expense, means living on $732 less per month for other expenses. Which once your car loan is paid off, could help you achieve FI faster.

If you can stay the course, without putting yourself in financial jeapordy, I'd recommend staying the course. Keep the ID4, keep making the payment, and buckle down on your other expenses.

Coach Holdren

I'm going to take probably the unpopular, un-FI response. It wasn't stupid to buy a car you wanted. Maybe it could have been better planned, but it wasn't a stupid choice. The FI-mindset is the voice telling you that you should be driving an older, used car. I say, toss that out the window. You love the car and it meets your current needs. You're believing the narrative that you should feel guilty about not putting that car payment to something else. Keep the car, keep enjoying it.

I bought a brand new car in 2019 with exactly what I wanted on it and nothing more and nothing less. Every used car I've ever looked at has more than I want or missing something I want. I spend enough time commuting that I want the car to perfectly suit my needs. Every time I have gotten in that car over the past 6 years, I've smiled and said how much I love that car (especially the seat warmers in winter). I will drive it into the ground because it has everything I want and nothing more.

Why did you go with an id4? That's over 10k more than I paid for my model 3, which has more range and a better charging network.

That said, if you wanted to save money you could have bought a used EV with low mileage for $20k, which is essentially what you have now.

I think you just have to keep paying this down as it would be a big hassle to sell it just to go from a $20k to a $15k car.

I'm pretty sure you didn't come here for math critiques, so I'll take your numbers at face value. In essence, you are in the unfortunate situation of owning a vehicle that, if you were to sell it today, would only provide a fraction of what it would otherwise have provided (i.e., before the EV market shifted so dramatically). This amount also happens to be substantially less than you currently owe. So, that means that you have to decide if you want to pay around $12k in order to get rid of it. If you wanted to get rid if it and not replace it (i.e., say you are a two car household and you intend to become a one car household) then I suppose it's possible that it might be worth it.

However, you would be drawing $12k from investments today to make this happen. If you were to turn around and save the $732/month loan payment amount, it would take about 18 months to replenish the $12k. To save $20k (an amount that gets you to $15k+taxes+fees+buffer) at $1332/month (your $732/month old loan payment + $600/month) would take a little under 18 months as well. If you can make it 18 months without a vehicle, do you need to buy another one?

And finally, one additional perspective. To make the above happen, you will forego $12k now, plus the potential gains over 18 months, plus the $600/month savings in your employer's stock (which I'm assuming that you do something sensible with, like selling ASAP and re-investing in index funds). To put that in perspective, with a 5% rate of return (i.e., a decent HYSA or money market level of return) the $12k would grow to $13k and your $600/month would accumulate to around $11k, for a total of $24k. That means that if you were to keep the car, in 18 months you are +$24k from where you are now. Granted, you are still shelling out $732/month on the loan. However, if you eliminate the car, and then save for another as you describe, your plan puts you down around $35k-$40k from where you would have been (depending on precisely how you project the returns, etc). All of that to say, you can spend $12k+$20k to end up with a much lesser vehicle, or you can sell securities, pay off the $36k loan balance and keep the ID.4 and drop the loan payment. So, by spending a little bit more now, you'd put yourself in roughly the same financial position 18 months from now, but you'd keep a car you like and save yourself the hassle and transaction costs of selling plus buying another vehicle. Of course, to wipe out a 2.5% loan, that doesn't strike me as a great idea. But if the monthly payment bothers you that much, it might be the right move for you.

The numbers are not adding up for me.
A monthly payment on a $49K loan @2.5%/yr for 6 years would be ~$730.
If the current retail value is ~$24K and you are about halfway through the loan, why do you say you are underwater by "at least $12K"?