Yesterday I made the final payment on Debt #3, which was essentially our car loan.
Just as soon as I made it I started thinking about the next step:
- ROTH contribution?
- Build up Emergency Fund?
- Start tackling the Second Mortgage?
It wasn’t until later that I started thinking… When was the last time we didn’t have a car loan?
Good Lord in Heaven I think this is the first time!
Oh, we’ve had “paid-off” cars before — usually because of some creative financing that allowed a lien release, but we just moved the debt around and gave it a different name:
- A credit card with a great introductory rate
- some random, unsecured loan
- even a Home Equity Line of Credit (really, really dumb — don’t ever do that).
How Many Cars Have You Gone Through?
I’d be hard-pressed to even remember just how many cars we’ve gone through in our 15 years of marriage. Seven? Eight? No, definitely more than that. (Maybe ten?)
At least we have the excuse of moving overseas a couple of times, which pretty much guarantees some car turnover.
And I can’t recall a single. one. that we bought without borrowing money.
Oh, wait! We did buy one with cash! A trusty old used Beamer that The Hubs drove while we lived in Italy. We used the cash we got when he sold his old Maserati before we left the States. Yes, a Maserati. The Hubs loved that old money drain sweet thing.
But we still owed money for our 4Runner at the time, although technically it was “paid-off” and the debt was called something else. Still.
We Have No Car Loan!
For the first time. Ever. It’s a pretty good feeling! Now here’s to hoping we never have one again…
How about you? Have you always had a car loan? Never had one? (Do you lease?)
Take my polls, please!
This will be so fun. I think I’ve even set them up so only one vote per person (computer) will be allowed. But I’ve never done this before so you’ll have to let me know how it works. I’d love to hear about any car loan woes in the comments, too — as well as some inspiration for driving debt-free and only buying cars with cash. How did you do it? Please share!
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{ 18 comments… read them below or add one }
We are a military family of four. Been married 11 years and have only had 3 vehicles. One car payment my husband brought into the marriage and we paid off pretty quick… but didn’t quite get the whole idea yet… so we took on a $19,000 car loan at the begining of our marriage. we paid that off in ’02…then in ’05 started this financial peace class and it blew our minds. We paid off and got rid of the credit cards!! Then decided to draw a line in the sand- never again no matter what will we take on anymore car debt. We still have both cars… my husband drives the honda we’ve had for 11 years, the sports car needs fixing, but is paid for and we still have it… and we saved up, paid cash for a honda pilot (’03). Haven’t had a car payment in 8 years. It is possible, it is normal for us now and it is lovely. however… someone convinced against his will is of the same opinion still… people cannot be convinced of this if they don’t want to be!!
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jolyn Reply:
March 8th, 2010 at 12:47 pm
Heh-heh, so right, so true.
I can’t wait to take Dave’s class. I’m waiting until Hubs and I can take it together. I’m trying to talk some friends of ours in taking it with us, too, whenever that ends up being…
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I’m 22, so I’m still relatively young when it comes to owning vehicles, but I’ve had three cars. The first was bought totaled and fixed up by my dad. It was a car that was only one year younger than me at 16. It had a bad problem leaking oil, and after Mom’s particularly bad car accident, my parents demanded I let go of the Le Baron and get a car with airbags. For Christmas, Dad gave me a 2002 Dodge Stratus, which was great. I loved that car, but someone pulled out in front of me (trying to turn onto a side road from the opposite lane) and the car was totaled when I hit them head-on. It was my first accident, and I remember staring at the car, crying and thinking, “Dad can fix that. He can totally fix it.” Then the car caught fire.
I was able to use the payout from the insurance company to pay down about 75% of my credit card debt and buy another car with cash – a 2005 Dodge Stratus that had 40,000 miles on it and cost $4,000.
I’ll never finance a car. I’m not going to pay interest for something that depreciates so quickly, especially when saving a few thousand for a car is easy to do.
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jolyn Reply:
March 8th, 2010 at 12:46 pm
Is it horrible that I laughed out loud when I read that? Of course it is… a car catching fire: That’s awful! But oh my word, you are funny.
“Saving a few thousand” is so easy to do and you’re only 22? (Hey, I rhymed.) That’s awesome! You’re way ahead of the game.
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I am 40 and have never had a car payment.
I’ve been lucky…and I’ve been smart. I also go for reliable cars and drive them into the ground if I can (some have been totaled by accidents). I think it is wise to make a “car payment” every month into an acct and then pay cash for a car in 10+ years when you are ready for your next one.
I’ve made a lot of financial mistakes in my life but I at least did car planning right. I also am not seduced by the flash of a “nice” car (atlhough I love a lot of other pointless things).
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We’ve been married 7 years. We are on car 2 (we’ve never had 2 cars!). the first one my parents paid for when I went to college. The second won we purchased 2 1/2 years ago when car 1 died. We found a great deal on a used Civic (thanks to a cousin who sells used cars). We took out a loan for the whole car, but then immediately paid for half of the car with our first payment. Then we aggressively threw money at it, and the whole car was paid for 8 months after we bought it. It is our intention to drive this car until it dies and by that point, we’ll have enough cash saved up that we can just pay for our next USED car outright. At least that’s our plan. You never know what life might throw at you, though!
Congrats on paying off your loan. It is an awesome feeling. We are really close to paying off my husband’s school loans (maybe 4 more months). Can’t wait!
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We will be paying off our vehicle loan in April and I’m so excited. It will be paid off three years early. Whenever we plan to buy another vehicle, hopefully many years from now, we are hoping to pay cash.
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Congrats! We’ve only bought one car together. We did finance through our credit union but the payments were around $150/month and we paid it off two years early. I love not having a car payment. We’re still paying ourselves that money (into our “car fund”) so we can hopefully pay cash for a bigger car when the time comes.
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In my married life, I am on my second car (the third total for my life). It has been paid off since 2006.
G-man is on car #4 in our married life. However, until our current car, we didn’t have a loan. His first car pre-dated our marriage, second and third were “beaters” compliments of our parents. And now the current car. Currently it is set to be paid off December 2011.
As a side note….in our early marriage, we didn’t have a car loan…but we did have a boat loan at $358/mo!!
My question about car loans though….once our car is paid off, is it better to continue to roll that money into a snowball, or start a “car fund?”
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Our cars have been paid off for a few years now (maybe 7 and 5?), and although one of them desperately needs to be replaced, we just have a hard time justifying getting into car loan debt to buy a new one.
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We used to think that having car loans and a mortgage with no crcdit cards was a good thing. . .but–we owe 55,000 with our two cars and RV!!! Happy to say we see that this is getting us nowhere and will have one car paid off by June–and then we’ll start putting more money down on the loan for 20,000. . .when all we have is a mortgage–I’ll feel like we have made some progress!
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We have 2 cars and no car payments– yippee!
We paid cash for one and the other has been paid off for 5 years.
In the 19 years we’ve been together, we’ve only had 3 cars total. We don’t drive much, so our cars don’t get much wear and tear and last a good long time.
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Great poll!!! Currently we don’t have any car loans, we paid off my car last September and I can’t tell you how great it feels to not have to worry about a car payment every month!
I myself have never paid cash for a car, (maybe because my parents always had a car loan?) but my husband paid cash for BOTH of his cars (maybe because his parents never had a car loan?)
So the next car we buy…who knows if we will get a loan or not, we’re hoping that my husbands current car will last a few more years (it is a 1998, with 180K miles so who knows!) But when the time comes we will definitely buy used.
As for how many cars I have had…I have had 2. The first car I had was my parent’s old car they sent me to college with, but I got in a car accident and totaled the car, and then we bought the car I currently have. Which I have now had for almost 4 years!
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This is a great post. We don’t have a loan right now, but we’re looking to buy a car within the next 6 months. We REALLY want to pay cash for a used car (out of savings) but I can’t tell you how many people have told us it’s better to buy a new car w/ financing from the dealer, especially when they’re giving 0% financing. We still want to pay cash and buy a used car, but it’s getting harder and harder to justify that decision, especially when older and wider adults keep telling us we shouldn’t. But the thought of having a car loan is depressing. We just paid ours off a year ago, and I can’t imagine having to scrape the money together again to make those payments.
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jolyn Reply:
February 24th, 2010 at 12:40 pm
Oh. My. Goodness. Please continue to research that decision and don’t just go off of opinions! I’m not even going to tell you that it’s for sure BAD to buy new from a dealer: I’ve heard ONE sound case where it wasn’t, someone who purchased a certain type of van. But largely, it simply doesn’t make sense to buy a car that loses so much of its value the second you drive it off the lot and BOOM you’re upside down on what you owe vs. what you could sell it for before you even have a chance to fill it up with gas.
Ideally, and GENERALLY SPEAKING, a car about two years old is the best purchase. Even better to pay with cash.
What would you be willing to pay for as a monthly fee for a car loan? What if you took that amount and set it aside for the next six months, then combined it with the savings you already have… What would that then allow you to buy and still remain car-debt free?!
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Chris J. Reply:
February 24th, 2010 at 9:55 pm
This is just my two cents, but I REALLY strongly disagree with what people are telling you about how to get your next car. It’s not just the car loan you should stay away from if possible, but buying a brand new car is, in my opinion, even worse than the loan! The car depreciates emmensely the second you drive it off the lot. If you buy a “certified pre-owned” car that is only a few years old, you can still have that nice fuzzy warm feeling you get from a warranty without the immediate depreciation.
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jolyn Reply:
February 25th, 2010 at 8:45 am
I’m inclined to completely agree with you, Chris. And thanks for the “certified pre-owned” car advice. Anne, I’d love to know what you guys ultimately decide and how you arrived at your decision!
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Congrats on being car-loan free! Feels good, doesn’t it?
Last August, my husband I purchased a new car with cash. The way we look at it, we “loaned” ourselves the money; we immediately began paying ourselves a “car payment” (separate savings account) every month. We’ll have our “loan” paid off in 3 years…and will hopefully be able to repeat the process the next time one of our cars gives up the ghost
The added bonus is, of course, that we’re not PAYING interest and are, in fact, earning a little interest in the meantime.
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I CANNOT wait to pay off our van. Once we do pay it off, hopefully March 2012, I plan to continue putting aside the money that was going to van loan to be able to pay cash for the NEXT car. I’d love to walk into a dealership (or even a private party transaction) and not have to deal with any financing options! But that is because I can never see us buying a brand new car anyway.
A Maserati?! You have to tell that story some time!
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jolyn Reply:
February 24th, 2010 at 12:42 pm
Heh-heh… I’ll tell The Hubs he has a request to write a guest post
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Well – it’s been 11 -12 yrs since I bought a car but, when we looked around and were at the dealers, it was ‘easier’ to get the car that way and if memory serves correctly, there was more incentive for them to sell (cheaper) with ‘their’ financing than waiting for us to get money via CU several days later – there was some catch in price/options otherwise. They wanted the sale and to get the car out the door- they didn’t care afterwards how we paid for it . Things may have changed – it may not make a price difference anymore.
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jolyn Reply:
February 24th, 2010 at 12:44 pm
11-12 years! Wow! I think things have a changed. A lot of dealerships in this country are just kind of falling apart right now, so I imagine you’d find the experience a bit… different than before. But I’m just supposing.
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I have no intention of ever getting a loan for a car! I just can’t see the sense in it unless you really really need one (but I don’t have kids so it’s easy for me to say that
).
Well done in paying the loan off….
Thanks,
Forest.
http://frugalzeitgeist.com
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One of the best ways I found to buy a car from a dealer (not that I’ve bought many) was to go ahead and accept the dealer’s offer (their financing (high) at a better vehicle price (low) ) and then pay it off with a loan from the credit union (low financing) before the first 30 day grace period was up. Make sure to do some homework/verify there won’t be any hidden costs/charges for paying the dealer loan off early – have the credit union prep’d before purchase.
Used car – I’d pay cash if able to. New – almost have to finance part – we’ve always worked to paid them (new car loan) off in 3 yrs.
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jolyn Reply:
February 24th, 2010 at 9:29 am
So your experience is that dealer cars’ cost is less if you agree to finance through them?
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Chris J. Reply:
February 24th, 2010 at 10:00 pm
Yes, I’d like to hear more about this too. We paid cash 2 years ago for our minivan, and it never even occurred to me we might get it cheaper if they thought we were financing through them!
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jolyn Reply:
February 25th, 2010 at 8:50 am
I guess the best way to find out w/be to present them w/both options and see how the numbers play out! But I’d be VERY surprised to see financing giving you a better price: Money in hand is simply better business. The dealer has more flexibility and motivation to haggle the price when you offer cash that he can bank immediately, as opposed to financing which does not give the dealer immediate, full credit.
Great job paying off that car loan! You are now free of all non-mortgage debt right? WOW that must be an AMAZING feeling. Gotta love the inspiration. So cool!
Roberta
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jolyn Reply:
February 24th, 2010 at 12:44 pm
Thank you, Roberta! It DOES feel good. Funny, I think it’s really still sinking in.
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