I’ll Always Have a Car Payment: Why It’s a Lie You Don’t Have to Buy

A few months ago, I was honored and flattered to be featured in my friend Heather’s Babble post about bloggers who are debt-free and how they did it.  I think it’s always inspiring and fascinating to hear how other people battled debt and found financial freedom.  Thanks to that post, I was approached by Jon White about participating in his Debt Free Living podcast.  Jon and I spent nearly an hour talking about how Mike and I came into our debt and how we went about paying off $100,000 in six years.  The podcast ended up being about 30 minutes long.  If you’d like to hear an in-depth account of how we became debt-free, have a listen.

One of the biggest factors in dropping our debt was a decision we made to never have another car payment again.  In the beginning, that meant selling our nice, shiny new car.  We’d purchased a brand new Honda Accord when the car Mike’s parents had leased for us was up.  That’s what you do, right?  We both loved that car … it was sharp, it had that new car smell, we seemed so grown-up.  Now, if you’d looked at our finances you’d realize that we weren’t making the most grown up decisions, no matter how we looked on the outside.  We realized that if we wanted to live our dream of owning a home, having a family with me as a stay-at-home parent, and function without financial stress, something had to go.  It was the car.

Mike sold the ’98 Accord and paid cash for an ’88 Accord.  It was not sharp, it did not have that new car smell (although it did have another kind of smell), and it felt like the kind of car you get “gifted” in high school.  But … it was paid for, and we were able to use the money that wasn’t going to a car payment to begin tackling our other debt.  It was just one step in the process, but it was a huge one.  It was like drawing a line in the sand saying we would never be slave to the lender again.

When it was time for me to change cars in 2004, we paid cash for a ’96 Honda Odyssey.  Using insurance money from the car I totalled (whoops) plus our savings, we got a great car.  How great?  I’ve been driving it ever since.

In the last two years, we’ve known that the time was coming to replace the van.  It had over 200,000 miles and it was starting to show its age.  With that in mind, we’ve been socking money away in a savings account.  Last month we finally reached a point where we realized that driving the van even as far as Nashville wasn’t the best idea.  It was time for something “new”.  We ended up buying a 2005 Honda Pilot with just over 100,000 miles.  We all love the car – compared to the van it seems brand-spankin’ new!  And best of all?  Still no car payment.

2005 Honda Pilot

I can’t help but get frustrated when people tell me that paying cash is great for me, but it would never work for them.  You don’t have to go through your adult life assuming that a car payment is just one of those things you have to have.  These are the most common arguments I’ve heard, and why I think they’re a myth our debt-riddled society has created:

1.  I need a dependable car. A used car doesn’t automatically equal undependable.  I drove the Odyssey for over 7 years and never once found myself stranded with car problems.  Do your research (Consumer Reports has great surveys on which used cars are the most dependable), keep it properly maintained, and a used car can be every bit (if not more) dependable than a brand new car.  For added assurance, purchase AAA membership – it’s way cheaper than a car payment and you’ll never find yourself stranded.

2.  It’s expensive to maintain an older car. Again, do your research and buy a car that gets good ratings for upkeep.  In the last 13 years we’ve owned 4 used cars (2 Hondas, a Mercedes and a BMW).  None of them required extensive maintenance to keep them running.  Yes, you will have to put some work into them.  But which makes more sense? $500 a month in someone else’s pocket or the occasional trip to the mechanic?  Put the money you don’t spend on a car payment in a savings account for any repairs … and if you don’t need it do something fun with it instead.

3.  I need a car that reflects my status. Our real estate agent told us this once – she couldn’t possibly haul clients around in a clunker.  Well, yes, I probably would think twice about getting in your Pontiac 6000 (sorry, Mike!).  But what’s the difference between a brand new car and a 2- or 3-year-old car?  Not much, other than your big ol’ car payment.  I will think more highly of you if I know you haven’t financed every last piece of your status.

4.  I can’t afford to pay cash for a car – financing is too good of a deal to pass up, anyways. It’s paying cash for that first car that’s tough.  I totally get it – it’s a hard cycle to break out of.  The dealers make it so much easier to trade your old car in and get something nice.  But they’re not financing cars because they care about you – they’re doing it because they’re making money off of you.  If you’re a few years out of needing a car, start saving as much as you can now.  Even $50 or $100 a month will make a difference in time when combined with the money you can make selling your old car.  If you have a more immediate need, consider making this car your “gateway” car to financial freedom.  Buy what you can afford that will get you where you need to go.  Drive something less than perfect for a year or two until you can save up enough to buy what you want.  It’s not forever, I promise.  Like Dave Ramsey says, “Live like no one else so that one day you can live like no one else.”

5.  I can’t get all the bells and whistles I want in a used car. Is a built-in DVD player, satellite radio and a GPS really worth going into debt for?  Buy what you can afford and use the money you save to purchase those things on your own.  My used car?  It’s paid for AND it has butt warmers.  I win.

The bottom line is, if we can do it, you can do it.  Take a chance and say goodbye to that car payment.  If you miss it, you can always get a new one!  I have a feeling you won’t miss that payment one bit, though.

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  1. Sarah Partain says:

    Yay!! We just paid cash for our ’04 new (to us) Odyssey. We saved up for almost a year, worked hard and bought what we could afford. And I LOVE it! 🙂

  2. Brandon says:

    We’ve bought 3 of our last 4 cars at Repo Autions (Adesa). 4-6 year old cars with under 50k miles can be found pretty easily and when combined with research (Edwards), it’s possible to find some really good deals. 4th car was a swap with my in-laws, fwiw.

  3. Angie, congratulations on your new purchase! How was the feeling paying for your new car in cash? Most people tell me it feels weird to write a big check for a car, but I always tell them it is a lot better than having a payment. Thanks again for sharing your story on the podcast. I had a blast and you and your husband’s story of getting out of debt is inspiring to a lot of people.

    • For me, writing that big check isn’t scary – it’s a relief. It feels so good to know that you’ve made this big purchase and now it’s done. No fretting over payments, instead you can just move on to saving for the next big thing. It was so fun doing the podcast with you – keep up the good work you’re doing!

  4. #preachit 🙂

    actually getting ready to buy our first 100% cash car in a month or so. being debt free is the bomb.com!!!

    BLowe gets the status nonsense a lot but let’s just a lot of clients have asked if they can buy our clunker truck {which you used to have to roll down the window to get out of it and still has no air}. I think people actually admire someone who’s willing to drive “less than” in the course of action to get out of debt.

  5. Every month, we don’t have to make a car payment. Because we OWN our cars outright. That feels pretty great!

    The downside is that our cars are not as reliable as they once were. We end up dipping into our savings once in a while to pay for repairs, which is extremely annoying. Gone are the days in which the car payment also included the bumper-to-bumper warranty, which I do miss.

    We are hoping to get down to becoming a 1-car family soon, and my hope is that that this ONE car is (a) totally paid off (b) highly reliable.

    Keep on trucking!

    • I hate those times when we’ve had to dip into savings to pay for repairs, too. I have to remind myself that even though it seems like a lot of money all at once, it’s still cheaper than a car payment every single month. Kudos on trying to be a 1-car family! We did it for awhile and it was kind of cool … and awesomely cheap in the insurance department.