I’ll be the first to admit, it’s hard not to “want” or feel the “need” to get a new car once you get the itch for one. By “new,” I mean any car that is younger, more shiny, has more features, or will get you to your destination faster than your current car.
Whether it is a slightly used car or a brand new car fresh off the lot, before you dive into years of car payments, have you considered simply ditching a car payment all together?
You might think that idea seems absurd or intangible, but let’s look at the facts. According to Dave Ramsey, one-third of car buys sign up for a six-year loan at an average interest rate of 9.6%. Among those buyers, the average price of the car was just over $26,000. That means statistically, one-third of cars on the road have an approx. $475 monthly payment! One thing most car dealers also won’t mention, is the fact that your new car depreciates by 25% of its value as soon as you drive off the lot. So after six years you will have paid $33,000 for a $26,000 car that will be worth on a measly $6,000 (if you’re lucky). Most people have a car payment and think that the only way to afford a car is by obtaining a car loan thus perpetuating the idea that having a car payment is normal.
I want to try to put this whole “having a car payment is normal” argument into perspective by telling you that debt aka a car payment, shouldn’t feel normal just because everyone is doing it. With that in mind, I want you to replace “car payment” with the word “debt” to get you into the right frame of mind for reading this post. If you had that $26,000 in the bank, would you rather pay cash for it or take out a loan to make monthly payments?
I would hope that you’d pick the first option and pay for it in cash, but I also know that many of Americans have less than $1,000 saved, if any savings at all, let alone that kind of cash lying around.
So if paying for it in cash isn’t an option, then you have to be willing to go into debt for it. However, what if debt wasn’t an option? What if credit wasn’t available? What if the concept of a “loan” never existed? Imagine a world in which you wouldn’t know what debt is or what the concept of a “loan” was. In this scenario you wouldn’t know what “debt” is simply because it wouldn’t exist, debt wouldn’t be an option. You would either have to save up enough money until you had enough or reassess what you’re able to afford with the money you have. If debt never existed or was not normalized by society, you would NOT think that debt is normal, you would just asses whether or not you can afford the item that you want.
Our society normalizes debt by saying “well everyone has debt,” and fail to consider possible alternatives. Let’s start by examining some reasons you may want a new/newer used car in the first place:
1. You’ve convinced yourself that you need more features such as GPS, blue tooth, leather seats, a sun roof, heated seats, etc. It is a matter of fact that these features will improve your driving experience and make life easier. I like to think about it as having 1000 cable channels to choose from, even though you can only watch one channel at a time.
2.) You feel inferior in the car that you currently have. This could be because you have friends that get new cars all the time, maybe you feel the need to impress people around you, or to outwardly “prove” that you made it! Does “making it” mean that you have acquired a significant enough credit score to get a car loan in order to pay off that fancy new car because you can’t pay it all up front?
3.) Perhaps you feel like you’ve earned it or deserve the new car! Simply because you can afford to make the minimum monthly payment because of the loan you qualified for.
Now that we have addressed the reasons why you may feel like you “want” or “need” a new car, let’s consider why getting that car makes you “average” in society. The “average” American is in debt. The “average” American has a car payment. The “average” American thinks this is normal and the facts of life. The “average” American fails to assess other possibilities or simply doesn’t have the patience to get a new car without debt.
I know purchasing a car for cash sounds easier said than done but it is possible. While you may not be able to get the latest and greatest car, you can still purchase a car that will get you from A to B with A/C for a reasonable price. Purchasing a car for cash just takes is a little preparation, some strategic saving, and patience couple with some creativity.
A few years ago I purchased a 2010 Jeep Patriot, Jackie, that I took out a loan for. Jackie is now paid off and I’m ecstatic about that, but every now and then I get the itch for a newer, nicer car. What keeps me grounded is NOT having a car payment, one less bill, one less debt, one less stress. It’s a great feeling to have. I have a car that is perfectly capable of getting me from point A to point B, and no she isn’t the newest thing on the marked, but I’ll take that any day over a car payment.
My last piece of advice is to take care of the car that you DO have! I treat Jackie like she’s a 2017 Mercedes fresh off the lot! I do this because I own her and because I want her to last as long as possible so I don’t have a car payment for years to come! If your car is well-maintained that will help curve the itch of wanting a newer car. Nobody wants to drive a beat up, dirty, smelly car!
If you’ve always had a car payment, imagine with me for a second, what it would feel like not to have one. What would you do with that extra cash each month? Saving $300.00 extra each month instead of paying $300.00 a month. Over the course of a year, you will have saved 3,600.00 (12 months x $300.00). Go a step further and imagine saving that car payment for 2 years, you would have enough to buy another car out right ($7,200). Again, I know buying a car with cash seems easier said than done but it is possible with some creativity and patience.
If you’ve fallen victim to the “debt is the only way” mentality, imagine what life would be like with an extra $300+ monthly in your pocket and a car that gets you from A to B and is paid in full. Next time you consider taking on another car loan, or debt, I hope you think about what’s best for you in the long run and know that debt is not the ONLY way!
(cited: http://www.daveramsey.com/blog/the-truth-about-car-payments)
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Deborah says
Yes car payment is a debt and let’s not funkify it.