Pay off car loan with savings vs Saving into Cash ISA

ricmag123

Essentially, I have £6200 outstanding in finance on a 2017 Peugeot 308 GT Line (the car was purchased in June 2023, at £7.5k. I had a quite lovely 2018 Jaguar XE beforehand that essentially spontaneously combusted and had numerous issues so I threw the head up with it and traded it in with outstanding finance hence the fact my finance was quite high).

I pay £177 a month and I am 13 months into my finance agreement which comes in around  10% APR. 

I take home around £2300 a month but my outgoings are quite high, with a £500 mortgage and £300 in child maintenance payments leaving little room for saving. That being said, I do manage to squirrel £100 a month into a MoneyBox Cash ISA, paying 5.2% interest, and I currently have around £9,300 in that.

 I also have a rainy day account, which I have to dip into far more frequently than I would like to, which currently has around £2k in it after a particularly heavy July of unexpected bills and a holiday.

I am not looking to get rid of my car for anything fancy, rather get rid of the £177 monthly payment in the quickest, most sensible way possible. 

My question is - should I (a) pay off the debt entirely using my around £11k in savings? (b) Overpay the car finance to get rid of it sooner?

I should add, I am quite cautious about money due to coming out of quite bad debt around 7 years ago, and the vast majority of my ISA balance was due to a gift from a family member, so I really want to be careful what I do with it.

Thank you in advance, I am open to all suggestions.

Spies

Well 10% APR on your car finance is more than  5.2% on your saver so the choice is clear, you'll save around £1500 by paying it off early.

CliveOfIndia

As above.  Essentially, unless you are earning more on your savings that what you're paying for the finance, use the savings to clear the finance.  Then, you pay £177 per month (the same as what you were paying for the finance) back into your savings to replenish them.  Overall you'll save yourself a fair bit of interest.

Just check whether there are any early settlement penalties on the finance agreement - if there are, then you'll need to factor that into the sums.  But even if there is a penalty, odds-on you'll still come out on top overall.