5% after federal taxes is generally 3.75% or less, depending on your tax bracket. Your net savings, after taxes and interest on the car loan is 1.85%. If your balance is $20k, that will be a net of $370 over the course of a year.Exactly what I was thinking. We're solidly in the 28% bracket, so our ING account (more like 4.5%) returns about 3.24% after tax. That gives a 1.34% net profit, or $201 annually on $15k.To me, clearing the burden of a $534/month car payment is more valuable than earning a small amount of interest. To justify keeping the loan, I would want a bigger rate spread.
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