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Breaking the Cycle of Car Payments

Updated on August 26, 2007

Do you have a car payment? Or two? Most people these days do have car payments. For many people car payments are a way of life, something they will always have. They don't think twice about this type of debt, much less worry about it. But there is a way to break the cycle of car payments. It may not be easy, but it will definitely be worth it.

For most of our married life, my husband and I have had a car payment. I started the marriage with no debt; he had a lot, including a car payment. Actually a lease at the time, but we quickly purchased this car - and he is still driving it 11 years later. Once we paid off this car, we started saving money for a minivan, knowing we would need something bigger in the near future. We didn't get very far before we purchased and were only able to put down a couple of thousand on the purchase of a new van.

By this time I was more than fed up with having this debt but I didn't know what to do about it. I decided then that this would be the last car payment we ever had. I started really getting our finances in order and we were able to pay off this van completely in 3 & 1/2 years, instead of the five years we were supposed to take. Thank you Dave Ramsey! The next step in the process of never having another car payment was to start saving that monthly payment. We did not go on a spending spree of any sort, although we did celebrate by going out to dinner. We most certainly did not go out and buy a new car to replace the one we just paid off.

By saving this money each month we were able to build up a good size emergency fund. This eliminated the need for a credit card, which helped tremendously to get us on better financial ground. Having money in the bank is such a security, especially in today's job market.

Owning a car for a few years after you have paid it off will allow you to save enough money to purchase a car, used or new depending on what type of car you buy and how much you have been saving. This is the biggest step you can take to breaking the cycle of a car payment. The next biggest step is saving the entire car payment each month towards a new car. Our cars are now 11 and 6 years old. At whatever point we need to replace the older car we will purchase only as much car as we have the cash to pay for. Then we will start over saving each month to replace the van when it needs it. Again, only purchasing as much van as we have the cash to pay for.

When we were paying the van payment, our payments were right at $400 each month. We paid off the van when it was 3 & 1/2 years old and will likely replace it when it is 9 or 10 years old. Saving that $400 each month for six years will result in $28,800 in savings - with no interest. That could purchase a pretty nice car.

Over time, with compounding interest working to our benefit, we should have more and more cash saved up to purchase a car with and eventually be able to purchase whatever we want and have enough money to do so easily. This is our goal and it can be yours too!


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    • Bob Ewing profile image

      Bob Ewing 10 years ago from New Brunswick

      Very sound advice, thanks.