You might love your new ride but hate the monthly price tag that comes with it.Is it possible to live life without a car payment? YES! You can be car payment free, for the rest of your life. I haven’t had a car payment in years!
Here’s how I haven’t had a car payment in years.
First, let’s dive into why car payments are financial mayhem.
According to a study by Experian, the average car payment is $503 with the average car loan for 68 months. Almost a third of new car loans stretch the repayments even longer, over 73-84 months.
Let’s say you buy a brand new car, for the average new car price of $33,560, with a 68 month term and interest rate of 3.5%, the monthly payment would be $544.
Over the life of the loan you’ll spend $3,487 in interest.
The real kicker is that cars are depreciating assets meaning that the value drastically drops fast and continues to decline fast.
Edmunds estimates that the moment you buy your car and drive off the lot, your car loses 11% the value, and by year five the car is worth 37% its original value. In total, you’ll spend $37,047 on a car that is worth $12,417 once it’s paid off.
As soon as your car is paid off, most people start the cycle again, or worst yet, Kelly Blue Book estimates that two-thirds of new car buyers trade-in a car that is worth less than what they owe.
It doesn’t have to be that way you can get out of the car payment cycle.
I haven’t had a car payment in years by first paying off my car loan that I did have early.
I bought a car in 2008 and initially had a 60-month term. For a couple of years, I paid the minimum payment monthly and then made the decision I wanted to be debt-free. With a ton of discipline, I paid extra towards my car and student loan to become debt-free.
I drove that car almost twelve years since I initially purchased it!
Although my debt payments are looong gone, I continued to take what I was paying towards my car and student loans and put in savings.
I outright bought my next car with cash! Here’s how that went:
- I Bought a New (to me!) Car with CASH!!
- My Painstakingly Slow Journey to Buying a Car with Cash (Continued)!
Life without car payments is great! That’s how I haven’t had a car payment in years. You can live car payment free too!