conversation: User (IMeanImNotLying): "I'm a part of the VW Buyback Program and I made out quite well. VW is paying off my current car loan and giving me an additional $9,000. I recently purchased a car for $9,700. Should I pay off a large sum of the new car note? If so, how much would you recommend? Or should I just take the $9,000 and invest it somewhere? - Thanks!  \n  \nSome background information on my financial situations:   \nI'm 24 years old  \nI have no debt (other than the new car loan).  \nThe new loan has a 3.5% interest rate  \nI am about $2,000 shy of 3 months emergency funds  \nThanks!"
  Self: "What other debts do you have?  In general, it's best to pay the ones with the highest interest rates first.  So if your new car is middle of the pack for interest rates, paying off something higher will give you a larger benefit."
  User (IMeanImNotLying): "I don't have any debt, fortunately - with the exception of this new car note. I'm just wondering if I should pay some of the loan off the newer car, and if so, how much would be recommended? Half?"
  Self: "What's the interest rate?  The stock market index funds return 6% on average over very long periods, so if your car note is less than 6%, investing the $9K in retirement will provide a higher financial benefit than paying off the car."
  jerf_mayne (jerf_mayne): "While that may be true, there's significantly less risk in paying off the 6% loan. It's basically a guaranteed 6%, so it's the risk-averse way to do it. There's no "correct" way to do it, but if you end up losing the bet with the leveraged money, you still owe your loan payments plus what you lose in the market. "
  RedditShadowBannedMe (RedditShadowBannedMe): "But long-term we could still expect that 6% even if it won't happen this year. As long as he isn't close to retirement, it should actually be the more reasonable bet."
  infinitesimus (infinitesimus): "Remember that past performance is not an indicator of future performance on the stock market :). \n\nInvesting is always a gamble - even with index funds - so I wouldn't say one can expect that 6% but rather, hope for 6% average over a long time\n"
  RedditShadowBannedMe (RedditShadowBannedMe): "While this is true, if we were ever experiencing long-term losses instead of growth, our retirement money would likely be the least of our worries. It's the safest bet with the expectation that we aren't entering some drastically different period of history."
  