Will You Always Have A Car Payment?

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Take Captive Every Thought

32 // May 2020

by Charles Howell

Charles Howell was trained under the Dave Ramsey Master Coach program. He has been a money nerd all his life. After retiring from a career in Information Technology in 2017, he is pursuing his dream career. Charles lives in Silver Creek, Georgia, and serves clients anywhere in the country. About The Author I was of that opinion for a long time. Cars are some of your biggest purchases, next to a home, and it would seem natural for that to just be a regular line item in your budget.

On the journey to get out of debt, paying off your car (or cars) is a major accomplishment, especially if done faster than the regularly scheduled car payments. With higher costs for cars, the time for a typical car loan is lengthening too. The last car loan I had was for four years. Now, it is not uncommon for loans to extend upwards of 84 months. It was a huge relief when I paid off my car early and was out of all consumer debt.

I like to think about the question behind the question or, in this case, the next question. If I am committed to staying out of debt, how will I buy my next car? The answer is hopefully, “With cash.” Again, that is a lot of money: no small challenge unless you just have tons of money available!

The simplest approach is to take what you were making as a car payment and set it aside each month for the next car. So will you always have a car payment? The answer is “Yes” and “No.” “Yes,” in that you will be paying for the next car, but it will be from savings; your “payment” is to your savings account rather than your bank. “No,” in that you will never hopefully borrow the money.

The discipline of making your money behave starts with budgeting and getting out of debt, but it continues as you purposely save for that new car.

If you want to make this work well, buying a new car is probably out of the picture. That is because new cars depreciate the most in the first year or so. Buying a quality used car that is about one or two years old is ultimately the sweet spot for your purchase. If you ever read the classic book, “The Millionaire Next Door,” you will read that a minority of millionaires drive the current year’s model of car.

In the years after being out of debt, you will probably work your way up in cars over the years, and they will each get easier and easier to purchase. That first $3,000 car will over the years work its way up to a nearly new car, all paid with cash.

All of this requires discipline. I like to call it “making your money behave.” The Book of Hebrews talks about discipline being difficult. It is, but over time, it is productive.

Hebrews 12:11: “No discipline seems pleasant at the time, but painful. Later, however, it produces a harvest of righteousness and peace for those who have been trained by it.”

Let 2020 be a year of discipline and making your money behave!

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