Things I Couldn’t Do If I Had A Car Payment

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Let’s Look At Our Financial Future With Car Payments

I hate car payments. With a passion. If you haven’t noticed, I don’t write about the best way to finance your car, which lease is the best option, or how to pay off your car loan with your home equity line of credit that you pulled out just before the housing bubble crashed, securing your car debt to your home, which you promptly wrecked while texting on your $100-a-month data plan phone that you bought with payday loans, causing you to lose your car, house and legs, all because you could buy a new car with a 0% interest. Nope, I don’t write about that stuff, because I don’t think anyone should have a car payment. Ever.*

If I Had A Car Payment

Let’s imagine, in another universe, I decided that getting a car payment was the only way to afford a reliable car. And of course, getting a new car was the only way to ensure reliability. Being the average American, I purchased a car for just over $25,000 and my monthly payment was about $450 (info from recent Experian study). Over the life of the loan, I’ll pay an extra $2,600 in interest, just because I really love giving my money away, and the car will lose 60-70% of its value over the next 5 years.

Assuming all things the same, here are a few things we would have to cut out of our budget because of our new pet car payment:

  1. Camping. We go camping every year with the family. It’s a really great time and something we look forward to all year. We only have to save about $50 to pay for it, but we would have to cut that item out. No more camping. But, you know, sleeping in our car in the driveway is pretty much the same thing, right?
  2. All gifts. We love giving gifts, especially during the holidays. We usually tuck at least $50 a month away for gift giving throughout the year and at Christmas. We buy for a LOT of people, but they are simple, frugal, heartfelt gifts that bring joy to others as well as ourselves. We would have to scrap this from the budget completely. Maybe giving people a ride in our practical 5-passenger vehicle is the best present they’ve ever received…?
  3. Vacations. We love to travel. And though we don’t have mich room in the budget, we do try to get out of state at least once a year for an enjoyable vacation. This year, we’re going to Florida, doing a day of Disney World and then hopping on a 4 night cruise for under $1,000. But, that would not be possible as our vacation money (about $100 a month) would be going toward our wonderful vehicle whose value is dropping faster than Felix Baumgartner.
  4. Dating. Forget dating my wife, we have a car to care for. Forking over the payment every month would force us to eliminate our date budget ($60 – $80 a month). I mean, a nice drive around town is a date, right? We could bring along sack dinners, and just park near a neighbor’s house who have a big TV in their window, and get a really good hearing aid, wire it into the car stereo and turn it up for sound. Let’s just hope a neighborhood dog doesn’t bark, blowing out our eardrums. You know, that, or a cop driving by…
  5. Feeding Our Dog. Dog food can be expensive. We pay about $60 a month for ours, and our dog is happy, healthy, and has never had any health problems. We would definitely have to cut that out of the budget to feed our car payment instead. Hopefully our dog can gain nourishment from sheer appreciation of our new vehicle. That, or we’ll just let her roam the neighborhood, hunting for food and eating garbage scraps to survive. At least she can find shelter under our new car…
  6. Freedom. I’ve said it before, and I’ll say it again, to me, budgets = freedom. But forget that, I would rather be a slave to the financier of my vehicle, sacrificing whatever I have to in order to make that payment every month. Freedom is too unpredictable, and I would rather come home to  the ol’ ball and chain car payment any day!

Wait, There’s More

So what I sacrifice all of those things for a car that I paid a total of almost $28,000 that’s now worth $7.500? I love my practical car with all of my wallet, why would I change? Heck, I’ll just finance another vehicle once I’m done paying this one off, because I enjoy it so much. I mean, why wouldn’t I do this for the next 30 years, everyone else is, right?

Let’s run some numbers here. A car every 5 years = 6 cars over 30 years. Assuming I continue to buy a $25,000 car every 5 years, here’s how it turns out:

Total Cost Sale Value Money Lost Lost Money Invested At 8%
Vehicle 1  $  28,000.00  $  7,500.00  $    20,500.00  $                                 25,296.00
Vehicle 2  $  28,000.00  $  7,500.00  $    41,000.00  $                                 62,984.00
Vehicle 3  $  28,000.00  $  7,500.00  $    61,500.00  $                               119,134.00
Vehicle 4  $  28,000.00  $  7,500.00  $    82,000.00  $                               202,788.00
Vehicle 5  $  28,000.00  $  7,500.00  $  102,500.00  $                               327,419.00
Vehicle 6  $  28,000.00  $  7,500.00  $  123,000.00  $                               513,101.00

I mean, it’s not that big of a deal. At least I had a “reliable” car for 30 years, right?

Don’t Sacrifice Your Future

Honestly, I don’t how you can look at the above numbers and not feel sick. Cars are one of the absolute biggest wastes of money on this planet, but marketing has really made having a car payment the norm, telling people they deserve new vehicles all the time. I really don’t see why anyone would sacrifice so many areas of their lives to pay interest on a loan for a depreciating asset, it’s just really bad math. I think there could be WAY more wealth accumulated in one generation by ditching the above method of purchasing cars than any tax break can ever provide. Don’t sacrifice your future because you are afraid of vehicles. Spend a bit more wisely on your vehicles and you can build the kind of wealth that passes from generation to generation if invested well instead of spent poorly.

Comments: Do you have a car payment? Why? Do you think that carrying a car note is a good way to build wealth? Here’s the kicker; How many people would take the money that they would have spent on a new car and invest it?

* I am not ignorant. I know that if you have enough money to buy a car with cash, and you opt to invest it instead and get a super low rate car loan, you can actually earn more with your investments than you spend in interest on your loan. However, I just don’t like playing that game. Also, if you are getting a loan, you are most likely buying a new car, which means your car is going to lose most of its value while you own it. But, I do want to thank everyone out there who buys these new cars, because they are subsidizing my future car purchases and eating all that depreciation for me 😉

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

55 thoughts on “Things I Couldn’t Do If I Had A Car Payment”

  1. I’ve been fortunate enough to never have a car payment but that’s mostly because I’ve driven beaters my entire life. This year I did buy a 2011 Camry (with cash) but I hope it’ll go at least 200k-300k miles. My wife drives a ’97 Accord and it just rolled over 200k last week! If we had car payments our budget would look totally different and we’d have VERY little wiggle room.

  2. I currently have a car loan. I don’t love it, obviously. I didn’t buy a brand new car so my loan isn’t as much, but it’s still there and it’s still costing me interest. If I didn’t have it, I’d probably be saving (not investing because I have some short term goals for my money).

    • Sorry to hear, hopefully you can kill that loan soon! And yea, the only scenario where I see it working out is investing the same amount of money as the loan, and it won’t work for most all people.

  3. I’m glad to be out from under my car payments. It definitely restricted my freedom when I had them. At the same time though, it won’t stop me from financing my next car. I’ll just make sure it’s a used car and that I only do it if I can get a good interest rate. Unless you’re buying a beater, I still believe in investing your money now rather than saving up money in a savings account that isn’t keeping up with inflation.

  4. I learned to buy quality cars and drive them forever from my parents. I love Toyotas and Nissans because they seem to last a long time. My dad still drives his 1999 Camry and it’s in great shape. I just drove it the other day and it made me realize how awesome my dad is. He could afford to buy a nice, new car, but he’s smart and practical! Also, he saves all his receipts from oil changes and maintenance. Who does that?! Every single one! My dad is very organized and fiscally responsible. I hope to strengthen both of those attributes.

    • Your dad and I are two of the same. I’ve only driven Hondas and Toyotas, and have never regretted. Both our cars are 1994 Hondas with over 250,000 miles on them, but drive great, get great mileage, and are enjoyable to drive.

  5. We have a car payment, but like you said at the end, we got a really good rate on it (0.9% I believe). We could’ve bought it wish cash but we chose not to. We also got a great deal because we bought a brand new car, but it was a 2011 so we saved even more there!

    I do think about what we could be doing without the car payment, but I do enjoy having the car, so it doesn’t bother me that much.

  6. I’m the type who is comfortable with the debt. Plus I LEASE the car for the tax advantages. The savings on income taxes AND keeping my money invested makes the car cost THOUSANDS less than buying it outright.

    I’m self-employed and can write-off nearly every cost associated with the car provided it’s for business usage. (Percentage of usage for business multiplied by ALL the costs = my tax deduction)

    • When you are purchasing for business, there are definitely other rules in play. BUT, I do have an upcoming post detailing how tax deduction are a BAD investment. As a tax professional, I see this all the time.

      The kicker is that you have your monehy invested earning more, which as I mentioned, won’t work for most people, but i’m glad you are seeing positive returns.

  7. We just took out a car payment. We have the cash that we could have spent, but I was able to get our loan for 1.49% which means I will pay less than $1,000 over five years. In only a few months I have been able to have that money in investments and made the $1,000. I like to think I made a wise choice 🙂

    I do see where you are coming from if you have a car loan at 3% or 4%.

    • Like Sean, we have a car payment, but for us it was mostly a matter of wanting to have money available for investments elsewhere (ended up being real estate). And now payoff isn’t a huge rush because it’s lower interest than our other debts so it’s got a lower priority. But we also didn’t buy a $28K car. We only bought what we could have paid for outright.

    • Well done, financial discipline has definitely worked in your favor. I personally won’t do this because of the risk, but mostly I just don’t buy cars that will depreciate very much, which means they’re less than $5,000. No need to play the investment game with that little money.

  8. We have a car payment; a series of events led to that. It’s much less than the mortgage, so we financed 100% and put all the cash we had for it against the mortgage. We are drive it for 10 years minimum type people though. For the vehicle we ended up looking at, our used options were only $3-5K less, for vehicles that had over 40K km on them and virtually no warranty, so we opted to spend the 3K and have full warranty and at least two more years of our own use.

  9. I ‘bought’ a new vehicle based off of a five year loan, and aggressively paid the loan off in three years. Never again will I go into debt over a depreciating asset. Silliest, stupidest money mistake. Ever. I’ll drive this beater into the ground and any further purchases will be made with cash only.

  10. This article is so on point! Its like you wrote it just for my baby sister. She has a 1999 Buick that she calls a pimp-mobile. Its bulky and not at all a girl’s car but, it runs. She hates it but, I keep telling her to keep it instead of financing a used car. She’s still undecided. As for me, I despise car payments as well. My husband decided to purchase our first car together through financing, the experience was so retched he now hates them too! Lol.

    • Well done, Veronica. If people can’t buy a newer car with car, I suggest only buying what they CAN afford. You can get some great cars for under $5,000, though no one seems to believe that…

  11. I paid cash for my vehicles in the UK and I paid 15k cash for my truck when I moved here. I don’t know what vehicle payments are like but Mrs.CBB did the 0% thing and said it was better than paying any interest at all. She didn’t want to buy a second hand car that would keep breaking down and ending up in the shop. The new one was covered for most things and still to this day it’s 9 years old she’s never brought it in for any problems just your usual brakes and oil changes. Vehicles no matter what way you look at it are a risk and can cost ya. Great Post.. loved the breakdown.

    • But vehicles can be a calculated risk, and buying a new car does not insure reliability. Glad it has worked out well for Mrs. CBB, though, 9 years is a great life for a car, and it sounds like it has a ton of life left.

  12. I just paid off my van so I don’t currently have a car payment. I’m looking to replace my van and will likely have to take out a small loan to purchase the replacement vehicle. I will keep the loan as small as possible and pay it off quickly though so it shouldn’t be too much of a detriment to my finances.

  13. I’m on board with your philosophy. I have always purchased used cars and have always paid cash.

    I liked your hilarious, yet true, point at the end about people who buy new cars from the dealers subsidizing the rest of us who buy used cars.

  14. Before we got married, my husband had an interest rate on his loan (of a used car, btw) that was lower than what he was making on his savings account (at the time). It made us uneasy though, and caused a lot of money fights. We decided early on to just pay it off and be completely debt-free.

    We own both of our cars free and clear. It’s a great feeling! The other day, I noticed a small scratch on my car, and while annoying, it was nice to know I wasn’t still paying on something that receives wear and tear and loses value everyday. I know that paying cash for cars isn’t easy for everyone, but if at all possible I highly recommend it.

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  16. I agree that car payments are a huge waste of money. Both of our cars are paid off and we have vowed to never have a car payment again. My minivan is older…but its clean and great for putting around town. There are so many other good uses for money besides having a car payment. Anyway, birds crap on them. People hit them with shopping carts. It’s just a waste of money to have a nice car.

  17. I played the car payment game for a while, but like credit card debt, I won’t go that route again. I hope to drive my car until the wheels fall off,and when if doesn’t make sense to get new wheels, we’ll buy something in cash. If I never have a new car, that’s OK. I’d rather have financial freedom.

  18. We have a car payment (low interest though) and it kills my soul. I have every intention of pay thing this car off and never having one again though. I plan to save enough money to pay cash for all future cars. It wasn’t optional for us though. Our old car near exploded and we need to have one so financing was our only option since we didn’t have any money in the bank! Lesson learned.

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  21. Two car payments but rate are pretty low. One on a used car. I feel like we spent a good amount of money on both cars, $10k and $22k, but I think both will be kept a long time. However I will say that I am considering replacing the used sonata with used minivan. I hope it didn’t depreciate more.

    What’s your thoughts on trading in a used car for another used car? How does the depreciation hit on those used cars kept for a couple of years? Until now we’ve bought new and kept it.


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