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How to NEVER have a car payment again- Part 1
- Start!(Saving Money)
Sometimes the hardest part is starting. Below are some tips to get the ball rolling.
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There are similar articles and teachings out there on this topic, but I have yet to find one that can benefit everyone, and can be customized for each readers specific circumstances. My goal is to not only provide you with the blueprint for your specific situation, but also provide a reliable experience. Yes I will share my path, and current progress in following this same process.
So let’s begin! But first a couple disclosures.
This process is not a quick fix, and will not give you instant results. If you are reading this to find out how to never pay for a car again starting tomorrow or a week later, you will not find it here. If you are not committed to following this process for years, you might as well save yourself the time and stop reading now.
This method does not mean you will be able to drive a brand new luxury car for free. Granted you could get there eventually, but you will need to swallow your pride for a few years in order to make this process work. So if you have the opinion that you just simply cannot be seen in an older car, and your self esteem and worth is hinged on The type or age of the car you drive this process may be out of reach for you as well. As I will point out sharing my story with this process, I drove a 14 year old car for about a year. You will need to look long term, and stay true to the system and the end goal, not the short term sacrifices you are making in order to make this work. Trust me it will be worth it, no matter what your circumstances or preferences are. But again, if you think you must have a high end, newer car all the time, this method may seem too drastic for you, and you might as well save your time reading on.
So to recap, you may want to cut your loses if:
- You are not committed to this process taking years, not days or weeks.
- You are the type of person who needs a newer, nicer car, and can’t fathom having an older car for a year or so.
The hamster wheel our society has created
Many reading this have either said, believe or have heard exactly what I have, that having a house payment and a car payment is just part of life. That simply is not true. Or at least it doesn’t have to be. You know who loves that you think like that? Car companies, dealerships, and especially lenders. Let me put into words what we are all aware of, but may not see how the full process works, since we may only experience it once every 5-7 years.
You buy a car, it doesn’t matter if it’s new or used. The point is, you didn’t pay for it with cash, and you took out a loan for it. Loans are general 60 months, or 5 years. So for the next 5 years you are paying for this car. On top of your principle payments, you are paying interest, or what I call interest-"the privilege of having something now you didn’t pay cash for." So let’s quickly look at the forces at work here. You have a monthly payment for your car. Your payments include interest, meaning over the course of your 5 year loan, you will end up paying more for your car than you originally bought it for. You pay more over 5 years, but the value of your car goes down, a lot. So you have forces moving in completely opposite directions. Let’s use some numbers to get an idea:
$15,000(very conservative car price) car at 4% interest for 5 years = $276.25 a month payment, total amount paid= $16,575. But let me show this another way. You may think 4% isn’t bad, but is that really how much more you paid? $16,575/$15,000= 110.5%. you paid 10.5% more for your car than you “purchased” it for.
But you are not off the hamster wheel yet. Even if you manage to keep your car for 5 years, and you paid your loan off, how long until you need, or want a different car? When that time comes, you trade your car in for a small fraction of what you paid for it, and put that money towards another car, usually one more expensive than your previous one, and you start the entire process over again! All of the companies involved with this process love it, it’s repeat business for life.
Some again may say this is just the way it is. You need a car to get to work and function, so there is no way around not having a car. I get that, I am not saying you should not have a car. What I am asking is, “why do you always need to have a car payment?” “Why do you need to take out a loan to own a car?”
Well the retort to those questions is that few of us can afford to pay cash for a car. That is an honest and accurate answer. But we can work towards that goal. And once you do pay cash for a car, you can build on that, and work towards having a better car, and eventually automatically having enough cash available to purchase a car every 5 years or so. I’ll show you how! If you are ready to step off the hamster wheel, continue the journey with me.