Automobiles, Debt Free, Debt Story

Four Years Without A Car Payment

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 No Credit Needed Archives – 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.

6 thoughts on “Four Years Without A Car Payment

  1. It’s been 5 years for me, I bought a 97 Lexus ES300 from a dealer that didn’t want it because it didn’t have heated seats, I bought it 3 years old in 2000 with 75,000 miles on it. I had car payments for 4 years (actually 5 but I paid it off early) and I’ve had no payments for over 5 years! now have 187,000 miles on it….and still running strong, my mechanic told me the car should last for 250,000 so I’m hoping for a few more years! And yes I save the difference in a high interest checking account.

  2. When shopping for a car, inquiring about a loan is a good idea as the dealer makes money off the financing, and will give a better discount. If you have a good credit score, you can negotiate the interest rate (which we did on our last car to match the best rate I saw locally). Even if you can pay cash, you can take out a loan and pay it off immediately (as long as it doesn’t come with a pre payment penalty (which I’ve personally not seen on a car loan),thus insuring an extra discount.

    That is a fairly well known car buying trick…

  3. Congrats! Technically my last car payment was in 2005 for a car I bought in 2003, but I was cheating myself really. In fact, it shows how financially stupid I really was back then.

    I paid off my 3% car loan with a 10% unsecured personal loan because I wanted some cash for other purchases! How mad is that?

    At the beginning of this year (6 years later!) I said “enough is enough” for my own reasons (see the “My Financial Meltdown” series of posts on my blog if you’re interested), and replaced that loan with an 8% unsecured loan that I am due to complete in a few months time!

    For the first time in my adult life, I will be DEBT FREE. And it feels great. It’s just such a shame it has taken me so long to realise.

  4. Excellent post! I too paid cash for a vehicle for the first time in my life about 4.5 years ago. Congrats on your accomplishment!

  5. Thanks for article, many people write but not many write interestingly, on it I very much like to read you, thanks once again

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