• thediligentdollar

The day we vowed to never have a car payment again.

It was a process that required steady effort. We paid off two vehicles (on which we owed $27,000 combined) in less than two years. And the day that we paid off our second vehicle, we said NEVER AGAIN to car payments! Way too many of us think that we will always have to pay a car payment... that it's just a way of life. That’s simply NOT true! There needs to be a shift in the way we think regarding our vehicles.

To many folks, a vehicle is a form of personal expression, to some it’s a status symbol, and to some it’s simply transportation from point A to point B. Regardless of where you fall on that spectrum, I’m not out to change your mind about the way you view your vehicle necessarily... but I would like for you to imagine a world without car payments. Your life with NO car payments. Seriously, stop and think about it!

The most expensive vehicle payment we had was $490/month; our other car payment was $360/mo. That’s a grand total of $850 each month leaving our checking account. When we started asking the question ‘What else could we be doing with that money?’ that’s when our attitude regarding car payments changed. We got super serious about freeing up that money so that we could be putting it to better use. (Not to mention the fact that we got sick and tired of knowing that part of each monthly payment was interest.)

The best way to avoid this problem is to never have a car payment to begin with. I try to encourage the younger folks that I know to not start the cycle. Some of them probably think I’m a little crazy, but it can be done. I wish I would’ve done it! (I’ll save that for another post though).

But if you are in a situation in which you have a car payment or two or three, get focused on eliminating those payments. Can you cut back here or there in your budget in order to throw some extra money at your car debt each month? It’s what we did! We cut back on how often we went out to eat and spending on wants and started throwing every extra dollar we had at paying off one vehicle at a time. It wasn’t long before the $12k we owed on our car turned into $11k, then $10k, then $9k - we were knocking off chunks at a time instead of just paying the minimum payment of $360. And it felt so amazing!

At this point in our story we had two debts - a car and a truck. The one we owed less on was the car so we started attacking that debt like I mentioned above. Dave Ramsey refers to The Debt Snowball when he talks about getting out of debt. We followed that method - which is common sense enhanced by a solid understanding of motivation and momentum building - and it works! As soon as we had paid off the car, guess how much extra money we could start throwing at the truck payment? Yep, you guessed it - $360 (the former car payment). Notice what we didn’t do with that $360 though. We did not go buy extra stuff that we wanted. We put it towards our DEBT. And no, it wasn't necessarily easy to restrict ourselves when we felt like we had that "extra" money to spend. But it had to be done because we had a much larger goal in mind.

With some steady effort (diligence) and perseverance it wasn’t too much longer that we had two paid-in-full vehicles parked in our driveway - title in hand. No more car payments to anyone - ever!! $850 of our income that isn’t leaving. It stays with us until WE decide what we want to do with it. Best feeling ever!!

And some might be thinking… ‘well what about when you decide to get a newer vehicle? You aren’t going to drive your current car forever, are you?’ Well, it’s simple - we will save in a ‘car fund’ and then sell our current vehicle. Add our savings to what we obtain from the sale of our current vehicle and voila′ - a new (to us) car. Of course, the more expensive the vehicle we desire to buy, the more we have to save. But it can be done. And it will be done - for us. We made a pact.


Some numbers to consider: According to Experian (one of the largest credit reporting bureaus in the U.S.), the average car loan in 2016 topped $30k for the first time at $30,032. The average monthly payment ... a staggering $503. The average term for an auto loan - 68 months---that's insane! Experian noted that this was the longest average term EVER. Within this same article, Experian mentioned the psychology behind the fact that most consumers don't want to see their car payment exceed $500 ---- so guess what that means? Nope, not a less expensive vehicle... it means lenders are stretching out that loan term to make sure that the payment falls right at or under $500 a month. Now people are paying on a vehicle for even longer. Yikes. Just something to think about.

Oh and for the sake of transparency - both of those vehicles that we owed lots of money on we purchased Brand New. We plan to NEVER do that again. More on why later though!

What could you do with that extra money once you release yourself from the shackles of auto loans?

Pay down other debt? Save it? Invest it?

The possibilities are endless! Definitely worth pondering!

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