Does anybody really like debt?
Of course, some people just think debt is great. Those who are making money on the loans just might be among those 🙂 However, I’m certainly not. I tend to think that its good to practice debt-free living in most cases. In the case of buying a car, this applies too.
I say this from personal experience. Now, this experience doesn’t make me any different than anyone else, in that many people have taken out a loan to buy a car. That seems quite typical, as a lot of people try to buy a car based on being able to borrow. It’s almost like a rite of passage for a lot of people, their first car loan!
Well, I think it’s better to pay cash for a car. The one time I actually took out a car loan, I couldn’t stand it. Sure, the vehicle was nice though! The best one I’ve ever owned, and one that frankly I’d buy again if I had the right income level to fit that in. But I had to make payments on it each month, and it really took away from the enjoyment of the car.
Just the notion of actually making a payment every month reinforces the reality that you really don’t own the thing outright. The loan I took out was for just a few years, but that payment each month wasn’t fun to make. When you make a few payments, and realize that you have years – not just a few more months – to pay off the loan, it becomes yet another burden. I eventually paid the car off, and later got rid of it.
I learned from the experience, and bought the next car by paying all cash. It was used this time, but that’s okay. The feeling of owning it in full provided some sense of freedom that taking out a loan didn’t. Naturally, not everyone is in a position to do this at all times. If truly need a car, you’ll want a reliable one, and that might entail taking on a small loan if your circumstances dictate. But WOW is it better to just pay cash and forget about it.
A good way to make paying all cash for a car is to regularly set aside money in a car fund. You can almost pretend that you’re making car payments, but instead you’re saving money in a fund. Here is one example of go about it:
- Start years ahead of the purchase
- Figure out the kind of car you think you will need, rather than one you’d like to feel cool in. Don’t be one of the Big Hat, No Cattle people.
- Determine the cost of buying a quality used version of the car
- Calculate a monthly savings amount that will allow you to finish saving for it in 3 years
- Make sure whatever you’re saving does not take away from ample retirement savings or an emergency fund
- Regularly save each month in a dedicated account, and make it automatic
No interest paid, and you’ll have the peace of mind of knowing that you own the car outright when you buy it.
If you want to delay the process of saving for the next car, then truly embrace the idea that a car is something to safely get you from point A to point B, and not a status symbol. Accepting that car longevity is important is what got me to drive a car well past 200,000 miles. Sure, a few folks teased me about it. But isn’t saving money worth getting teased by others who overspend? I think so!
What About You?
How do you save for buying a car?
Do you take on car loans when buying a car, or do you pay in cash?