Pay Off Cheap Auto Loan Or Hold The Cash

[Craig Kleffman]

Hi, 

So, unique accounting and finance question for the group I think.  

We owe $22,000 on our 2014 minivan.  We borrowed the money at 1.9% interest.  The monthly payment is $630.  We have three years left on the minivan loan.  We have $30k in cash.  We earn about $180,000 per year.  We have no other consumer debt; although, we have student loans--under 4% interest--of about $130k; we pay something like $850 a month in debt service on the student loan debt.  The combined debt service is, consequently, $1,480 or so.  

We intend to buy/flip a property to ourselves.  Here are some details about the plan:  https://docs.google.com/document/d/1LdWXhU9Ot5S3UF....  

I think we could use one of several financing paths. First, we could buy a very distressed property with a hard sale lender, and then use it as a bridge loan to get to an FHA 203k and use all of that lower interest money to fund the rehab. Second, instead of a 203k loan, we could fix the property using funds from a hard money lender (or even some crowd sourced money mixed in with a loan against our retirement account), and then do a cash out refi at the end of the rehab and hold our property that way. Third, I suppose we could end up simply buying a retail property with conventional financing (perhaps a "paint-and-carpet" category property).

With that in mind, how do we optimize our cash vs. car loan? On the one hand, paying off the van provides us with $630 per month in extra cash flow, and will provide us with greater ability to borrow more money on a retail/traditional SFR. But, on the other hand, having $30k in cash seems to be very comforting to either a private lender or even a hard money lender.

I must admit I have a slight inclination to simply pay off the van.  We've been very aggressive with retiring debt.  And, I've never regretted it (for example, in 2014 we paid off $39,000 in student loan principal, and we did so even though we had our second child that year).  

I'd love to hear the thoughts of the gurus and the commoners :-).  

--Craig.