Wednesday, October 26, 2011

Overcoming The Dreaded Car Payment

I remember in my early 20's, when I still lived at home rent free, I bought a shiny new red sports car right off the lot. I had an astronomical car payment that shackled my finances for years. In fact I never paid that thing off I just traded it in when I got married because my new giant husband couldn't fit in it.

All through our early married years we had car payment after car payment after car payment.....until finally we decided to just put all our energies into paying off what we already had and driving it until it died. No more replacements or newer models until we actually needed one.

We haven't had a car payment in 7 years. Both cars are paid for. I can't even tell you the freedom that brings to my budget and my stress level. Yes, both of our cars are from 1999 (a volvo and a suburban) but the fact that I'm saving around $600 a month in car payments makes them feel like that first shiny red sports car I used to drive.

But lately I've been aware that their days are numbered and I've been faced with the possibility of a car payment once again. The volvo will probably last me another 10 years if I keep up with maintenance and repairs. I love that car. But MAN, I don't want another budget busting payment when my suburban keels over. And at almost 13 years old, it's coming whether I like it or not. We don't have enough saved up to buy another reliable car with cash, so I came up with a plan. I decided I was going to be proactive and make a car payment to myself. As I drive the cars we now have into oblivion I'm going to start making a car payment to my savings account of about $200 to $300 a month. Hopefully before an urgent replacement is needed I'll have saved enough to pay cash for the next one.

Making a car payment to myself will require some self discipline but will also save me so much money in the long run. There are no interest fees to this car payment and much more of a grace period than if I were paying a bank. And OH! The satisfaction of paying cash for that next car and continuing with the tradition of being car-payment-free.

So if you are still saddled with a car payment I would encourage you to pay that puppy down. Even if all you can add is another $20 a month you'll be speeding up the process immensely. And I can't even tell you how much flexibility it will give you in your budget to be able to put that car payment towards something a vacation.


Peggy said...

Gayle, we were faced with the same dilema . We had not had a car payment in 10 yrs. after a few months of doing the one car family plan and looking for a second used car for mom. we came to the disision that buying a new car with a very good warrenty was the answer for us.We chose a four yr. payment plan with higher monthly payments .That will give us a car that is under warrenty 3 yrs. after pay off.My dear husband then with out the preasure of 'have to' rebuilt the engine in my van and now we are the happy owners of three cars,one as back up!
I am not sure that it is a money sving hint,but a security hint is that I carry AAA so that if when driving one of our older cars,I have a problem I can make a call and get the help I need. Thanks,Gayle for all the tips and encouragement ! Peggy

Anonymous said...


Making the car payment to yourself is a great answer so that you can avoid a car payment.

I have a few articles about buying a car but my hubby made a formula for our family years ago.

With 6 current drivers and more on the way we had to.

OUR guidelines start with research as to what car best fits the needs of the driver or shared drivers.
Don't be afraid to have one car for four teens in the home and make them learn a schedule to share etc...
After you discover the type of car you think your buying narrow it down to the exact car , next try shopping places like Carmax and used car lots and the newspaper get a great ballpark idea of what a great price for the car you want to buy would be.
Look for a car that is roughly two years old with 30K miles on it or less this way you still have some warranty left if you find it has some defects that need to be solved later.
Apply everything you can into a down payment and pay for the car as quickly as you are able too.
It is not zero car payments but it does turn into no car payment quickly and no large maintenance fees right away as well.

Make certain you get the FAQs on the car your buying!

Sara said...

We bought our current van off of Craigs List). It was missing a back seat (was used for deliveries), and the seller was desperate to get rid of it because her business had closed down. We paid several thousand less then blue book value, found a seat for $200 at a junk yard, and paid cash for everything. We'll always buy used and we'll always pay cash :)

Kathryn said...

Hi Gayle! I am wondering if you ever saw the Dave Ramsey you tube video Drive Free, Retire Rich. It is very good. That is how we have convinced our teens that they don't need car payments. Cash only!

Kathryn said...

Hi Gayle! I am wondering if you ever saw the Dave Ramsey you tube video Drive Free, Retire Rich. It shows these principles. That is how we showed our kids - cash only - Pay yourself until you can buy it

Spendwisemom said...

We also have not had a car payment in over 10 years. It feels great. When we decided to only pay cash for cars, we only had enough for a car that was 25 years old. It lasted long enough to save the money for a car that wasn't so old. We worked up the ladder until the newest car we have is only 3 years old. It was so hard to pay all that cash for a car at once, but it is so worth it though when you don't have any payments. It helps you appreciate it more when you have to make a big sacrifice for it.

Susan @ The Royal Cook said...

Just found your blog and am loving it!

We haven't had a car payment in over 5 years and it feels SO good! We live debt free and love every minute of it. Before I got all the way through your post, I was going to tell you to make a car payment to your self every month, but I guess I didn't need to. The great thing about making a car payment to your self is that you earn interest instead of paying it. :)