There are lots of free amortization schedules to run different scenarios. What happens when you pay an extra $100 a month or more? Our method on the past four trucks has been to finance each truck for the longest period possible and then figure what the payment would be to pay the truck off in three years. That three-year figure is the base payment we make on the truck and then add to that payment when possible.
Our first goal is to maintain a healthy emergency fund that is at a minimum of $10,000 and is continuously added to. After we reached that minimum, any extra money is split between the truck payment and savings. The base amounts are considered a line item in the budget book for the month.
As it gets closer to paying the truck off and still maintaining a healthy emergency fund, my patience runs out, and the truck is paid off earlier than planned. The bonus of not making a truck payment is not a bonus to pay us more, it’s a bonus to put into savings for the next truck. Each month the former truck payment is put away along with any extra money that is earned.
Making payments is a thorn in my side, and many years ago, we bit the bullet and said no to buying anything on credit or taking a vacation on credit. The process took us several years, and we found that we had many choices that we could do for free with our girls. There were a couple of things over the years that we have made payments on, our house and our trucks.
When we bought our first Freightliner, we drove it as if we stole it. That did not last long as we learned more about fuel surcharge and that driving the speed limit in most cases did not make us any more money. We had delivery appointments, and arriving early meant we often sat and waited with the generator running to keep us warm or cool. We shed our driver mentality and started using business sense, and our profitability increased. We had the right truck to make us money, it just took us about six months to figure it out. That is a lesson we have never forgotten.
Here is an example of what $100 extra a month can do on a five-year note for a $120,000 truck:
- 8% Interest
- Five years
- No extra money put towards the principle
- You will pay $25,990 in interest
If you apply $100 a month extra to the payment, you will pay $24,689 in interest, a savings of $1,301 paid to you, not the bank, and you will pay the truck off two months early. Little tweaks to your truck payment directly benefit you. Get a free amortization schedule and see what will happen if you pay a little extra.
Each truck owner has to look at their situation to see what makes sense for them. In our case, we found out nothing drives as well as a paid-for truck.