Thursday, January 07, 2016


Getting off the car payment treadmill

Here's how *I*, personally, got of the car loan treadmill. When I got divorced, I needed a car and couldn't afford to pay cash. So I bought what I could afford and kept driving it well past the time I paid it off.... and then I never stopped making car payments--Not to the bank, but to a designated "new car" savings account.  

When the car eventually reached the end of its useful life, I had a subtantial down payment on the replacement--- not enough to pay cash, but enough to only have to finance about 30% of the cost. 

I repeated this process with each subsequent vehicle --- I havent had a real "car loan payment" in about 20 years. I paid cash for every subsequent vehicle. 

The key principles behind this process are: 
1. You have to remember that your car is a machine for transportation, not an object of worship. That may be a seriously pragmatic concept, but I find very little romance in cars. I drive and purchase the best tools I can afford to meed the current needs in my life. You need to treat a car well so that you get maximun useful life from it, but you shouldn't forget it's a tool. Use it as long as it serves your needs--- nobody makes money on trade ins or used car sales except dealers.
2. Committment to the process and discipline. And this one is tough when you are young and broke. You cannot allow yourself to fall prey to the "now that I've paid off the car, I can use that money to....." temptation.  Or the temptation to raid the new car fund for other purposes.... the one time I let myself do that, my current car committed suicide weeks later and I had to either settle for a lesser replacement car or get back on the loan merry go round.

It's not sexy, or revolutionary, but it works.

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