Since I began my journey to live debt-free, I’ve come across a whole lot of naysayers who seem to think my new perspective on money and debt is flawed. People are always trying to influence me and debate with me on why I should be in debt, or why it is ok to go into debt. The can talk all they want and give me all the reasons in the world, I’m NOT borrowing any more money— well, at least no car payments, credit cards, etc. (We’ve established a reasonable 15-year home mortgage with a good down payment is acceptable). I’ve learned my lesson. I messed around with debt long enough and it has taken me nowhere but down and broke.
The most common arguments I hear are:
- “A credit card is necessary for emergencies.”
- “Credit cards are ok as long as you use them responsibly and pay them off each month.”
- “I get to check my bags for free when I use my AMEX to purchase flights.”
- “I need a newer car so I don’t have to spend so much on car repairs.”
Of course there are billions of others, but these are the ones that come to mind. Let me rebuke these silly ideas.
- Having an emergency savings fund is better for emergencies.
- You won’t pay them off each month.
- I get to check my bags for free, too– I fly on airlines that allow me (Southwest).
- You will have a car payment and car repairs.
This last statement is what I wanted to discuss. “I need a newer car so I don’t have to spend so much money on car repairs.”
I just recently had this discussion with a colleague of mine. He actually had some cash on hand that he could’ve used for a decent used car. But he was worried if he didn’t get a newer used car (with a car payment) then he’d just be wasting money on car repairs. This logic (or lack thereof) just drives me nuts.
Let me explain…
I’ve heard people say that they are always going to have a car payment. Their logic is either they will have a car payment or they will have car repairs. No, you don’t always have to have a car payment, but yes, you will ALWAYS have car expenses. But guess what? If you drive a car with a car payment, you get both.
Currently, the average car payment in America is about $490 (Ouch!)—which implies that some are more and some are less. Let’s just say you purchase a newer used vehicle for about $14,000 and the car payment is about $250. You’ve guaranteed that you will at least spend $3000 every year you have that car—we haven’t even gotten to the tires, brakes, oil, general maintenance, etc. These are things that every car requires, car payment or not. So, if you choose to go with the car payment plan, you’re looking at a minimum of $3500 to $4000 in overall car expenses (not including gas). Are you telling me that an older used car that is paid for with cash is going to cost more that $3000 annually to maintain? Not likely.
Full disclosure: I drive a 2003 Nissan Altima with 210,000 miles. I paid it off about a year ago (I wrote about it here). I use my car for work so I drive it a lot—about 30,000 miles last year. My car requires A LOT of upkeep, but not $3000 worth annually.
Nobody is asking you to drive a clunker for your entire life. But if you eliminate the car payments and save up money and purchase a car you can afford— you know you can afford it if you have the money to pay for it—eventually you will be able to pay for and drive a nicer car.
Don’t let the myth that older cars are more expensive to drive fool you. It is a myth. Yes, there will be more frequent repairs with older cars, but you will still come out ahead in the end when you drive a car without a car payment.
Oh, and don’t listen to that crap about older cars not being safe enough. There are plenty of used cars that are plenty safe. My Altima is safe. I used to ride around in the back of my mom’s station wagon facing backwards. I think your kids will be ok.
All cars require maintenance. Only cars with car payments have car payments.
*debt-free mormon is a certified financial counselor serving the northern Utah area. If you would like help with your finances, one-on-one counseling and coaching is available. Send an email to firstname.lastname@example.org