<prompt> Human: I have about 10k left on my auto loan. I could pay it off, but my interest rate is only 1.89. According to inflationdata.com, the current inflation rate in the U.S. is 1.75 and likely to go up to 2. That being said, would it make sense to let the bank continue to finance the auto loan, or should I just pay it off if I can? The way I see it, I can keep my 10k cash and invest it. As long as I am making above 0.15, the difference between the loan and inflation, it would make sense. With the car being a depreciating asset, and the nature of the loan being asset-based, I suppose the true cost to the bank would be even higher. This leads me to think I should maintain the loan for the foreseeable future.On the other hand, it would be kind of nice to have more cashflow every month, but this is not necessary. Question for you: am I right in my thinking or is there some kind of conventional wisdom Im not seeing? What do you recommend?  <response>: As long as I am making above 0.15, the difference between the loan and inflation, it would make sense.Your money has to return at least 1.89 to break even, not 0.15 and that is after taxes as well, so unless you invest in munis, the actual return will have to be even greater to cover any additional tax liability.0.15 is the real cost i.e. above inflation of your loan - so you could also say if you can make 0.15 real return, you would break even at least right now - inflation can go up or down any moment, its very hard to predictThere is really no way to get risk free positive real yields right now on shorter time horizons however. Real yields only turn positive somewhere around 7 year maturities right now.I am not sure what the term of your loan is, but it looks pretty fairly priced, so it probably wont make much difference if you pay it off or not - depends on your risk tolerance. You can choose to keep the loan, and invest your cash in riskier investments, and you would have a positive expected return from doing that, but there will be some chance your investments lose money too, so thats the real tradeoff you have to make. 