I was sifting through some old paperwork today, and I stumbled across an old letter from our bank. It was dated September 8, 2005. I was pleased to see that it was a notice from our bank, informing us that our car loan had been paid-in-full. I smiled as I put the letter back in its place and then I went searching through the– for a quick trip down memory lane.
On August 29, 2005, I sent the final payment to our bank and paid off our car loan. It’s hard to believe, but it’s been four years since we’ve had a car payment. And to think, I used to be one of those folks who assumed that I would “always have a car payment.”
Instead of making car payments, I now make payments to myself. Each month, I put an amount equal to a car payment in our savings account. When and if we need to buy a newer car, we’ll do so out of our savings. Instead of going in to debt, and paying interest, we are able to remain debt free, and earn interest as we save.
A couple of years ago, we used this technique and purchased a new-to-us automobile, with cash. While it hurt to write a single check for such a substantial amount, it felt good to feel “in charge” of the car-buying experience. I didn’t have to worry about payments or interest rates. Instead, I was able to focus on price. As a cash buyer, I didn’t have to worry about being approved for a loan. I was able to find the car I wanted, negotiate from a position of strength, and rest assured, knowing that I had enough money to complete the deal.
Right now, I’m saving up to replace my old truck and my eight year old Honda. As I work toward these goals, I’m in no hurry. In fact, a mechanic buddy has my truck, right now, and is giving it a good tune up. Since I only use it to carry off the trash and do work around the yard, it might be another decade before it needs to be replaced. I keep the Honda serviced, and I’m hoping it will last me several more years, as well.
It is impossible to explain how good it feels to live without automobile payments. Sure, our cars are a little older and we have to be proactive in our planning, but all of our efforts are so worth it.
For those interested, you can click here to read about our debt reduction journey.