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You Don’t Have To Have A Car Payment

America has fallen for the lie that a car payment is required in life. While it might be normal, it is definitely not required. I can’t tell you how many times someone has told me why they have to have a car payment or wonder how in the world we live without one.
I still remember the monthly total of the last car payment I had: $396.11. That payment was for a 1999 Chrysler Town & Country minivan. It was one of the worst financial decisions I’ve ever made in my life.
Sabrina and I had just found out that we were expecting our first child. We were approaching the mileage limit on the lease of our brand new, 2000 Honda Accord and naively drove onto a car lot to “just look”. Don’t even get me started on how terrible of a financial decision a lease is. Unless your company is paying for your lease, it is a horrible financial decision.
The salesman saw us coming from a mile away. Before we knew it, we drove off the lot paying full sticker price for the van on a 72-month loan. We tacked the remaining lease onto the loan and put a $500 down payment on our credit card. Yep, we were those people. 72 months later, we made our last payment and made the commitment never to have another car payment again. We’ve stuck to that commitment, and so can you.
Having a car payment is not a requirement. I understand the lure to have one. Trust me, living without a car payment requires sacrifice, comparison traps, mocking from people who think you’re crazy, and a lot of hard work. In spite of how difficult it is, the fact that we owe no money on anything but our home is an incredibly freeing feeling. I’ll take the taste of debt freedom over the smell of new leather seats every day and twice on Sunday.
Also, having a car payment isn’t a sin. You’re not a bad person if you have one. Some of the people in our lives whom we love the most choose to have a car payment, and that’s their prerogative. We don’t love or respect people any more or any less for their financial decisions, I just wanted to share a little bit about how we make ours.
So, here’s how Sabrina and I have lived without a car payment for over a decade, and how we plan never to go back again. You can do this too! It won’t be easy, and you’ll make mistakes along the way, but you can do this.
1. Live below your means (on a budget)
Currently, Sabrina and I are living on 74% of our income. It took a long time and a lot of effort for us to get here, but we made it. That 74% includes our tithe, actual living expenses, vacation savings, Christmas and birthday savings, kids allowances, discretionary spending, literally everything that goes out each month. It does not include our regular savings or retirement.
The only way to live below your means successfully is to have a written budget and sticking to it. Everyone can do this. Even if you have irregular income, people like Joe Sangl and the I Was Broke, Now I’m Not company have some fantastic free resources to help you get on and live on a budget. I can’t recommend Joe Sangl enough. He has helped change our financial lives, and I know he will for you as well.
Each paycheck, Sabrina, and I sit down and tell all of our money where to go on paper first. We give every single dollar a name and tell it where to go. The first 10%, tithe, always goes to God through our local church. The next 10% we have automatically put into an online savings account. We use Ally bank. My retirement gets automatically deducted from my paycheck. The rest we budget until it is all spent on paper to zero.
2. Make savings a priority
You’ll always have a car payment if you don’t choose to save. I consider saving the second most important thing I do with my money each payday. The most important thing is my tithe. God owns it all. He asks for the first 10% back as a sign that I trust Him and a way to worship Him. I gladly give Him what He’s asked for so that His blessing is on the rest. As Mark Batterson says, “God can do more with the remaining 90% that you can do with all 100% on your own.” But back to saving.
We treat our savings as a payment. Like I have to pay my mortgage, utility bill, or insurance payments each month, we treat our savings with that much weight as well. We use Ally bank online and have 10% of my paycheck automatically placed into a separate savings account. We followed the I Was Broke, Now I’m Not financial ladder and are on our way to our goal of having six months living/emergency expenses in savings this year.
Having savings is the only way you’ll live without a car payment. When people are faced with a $1000 repair bill without savings, they often run to a $499 a month car payment instead. $499 is the average car payment in America today.
I hate math, but do the math with me. If I pay $499 a month for a car payment, that’s roughly $6000 a year. I’d much rather drive an older car that I paid cash for so I can pay myself that $499 each month into my savings. The odds of spending $6000 in car repairs on a decent car in a given year is astronomical.
If I pay myself that $499 a month, in one year, I have $6000 saved to buy a car. Heck, cut that in half. If I save $250 a month, I have $3000 in one year to buy a car. You can get a very decent car for $3000. The car my wife currently drives we paid $2500 for, and it has been great!
There are hidden savings to an older, paid for car as well. Because we have savings and we don’t have leans on our vehicles, we can have liability coverage only. Because our cars are older and less expensive, the initial tax payment and the annual registrations are much cheaper than a new car.
We don’t live in fear of our cars breaking down because even if they do, we have the savings to do something about it and the margin to build that savings back up.
3. Choose to live a debt-free life
This probably should have been the first thing, but whatever. If you’re going to live without a car payment, you need to choose to live debt-free in all areas of life. Debt is crippling. If you look at the average debt statistics for Americans, it is heartbreaking. Debt in other areas of your life will make it hard to live debt-free in the vehicle part of your life.
When we decided not to have a car payment again, we made that choice in every part of life. Yes, we fell back into debt more than once in the last ten years. We took on some medical debt on more than one occasion, some professional debt, and some home repair debt. It was those falls back into debt that gave us our “I have had enough moment” to start taking savings seriously.
When we made savings a priority and made debt no longer an option, it changed everything. Sure, there are some scenarios where debt is unavoidable, but they are few and far between. Catastrophic medical needs or catastrophic home repairs are at the top of the list. But typical medical issues or home repairs shouldn’t be the culprit.
It’s hard to watch $4000 leave your bank account for braces on a child, but again, it’s way better than the monthly burden of paying debt on metal in my child’s mouth. (That’s true for any significant need you use your savings for) Whenever I start getting discouraged about seeing my savings amount go down because of unforeseen needs, I have to remind myself, “That’s why it’s there!”
4. Lower your standards
This is the one many of us aren’t willing to do. The marketing companies for car manufacturers are brilliant. They convince us that what was once considered a luxury is now a necessity. Ten years ago, none of us thought we needed a backup camera, push-button starts, or heated seats. Don’t get me wrong, I actually want each of those things, but I don’t have them.
We’ve made the decision to drive cars we wouldn’t usually choose. I drive a 1999 GMC Sierra truck that we paid cash for in 2016. It currently has over 180,000 miles on it. I paid $4500 for it and have put maybe $3000-4000 of repairs into it in almost four years. Think of how much I’ve saved in four years.
At an average of $499 a month for a car payment, in four years, that would be $23,952, not counting the full coverage insurance and higher tax and registration costs. Even if I spent $10,000 on repairs, I still saved $13,952 in four years. You can’t beat that math.
My wife drives a 2007 Kia sedan that we paid $2500 for. It has about 137,000 miles on it right now. Neither of our cars has many bells and whistles. No leather. No heated seats. No backup cameras. There are some hail dents, malfunctioning mirrors, creaky doors, and weird sounds, but they run great, and we don’t owe a dime on either of them.
The amount of money we’ve saved in the last few years by simply choosing to lower our standards has been life-changing. We can provide things for our family that we would never be able to provide, were it not for the debt freedom we choose to live in.
As tempting as it so often is, I don’t ever want to go back. Yes, there are many days we want to throw in the towel and get us an awesome car, but we quickly remember how much more awesome it is to own our cars outright and not be a slave to the lender.
This leads to perhaps my favorite tip we’ve learned for living without a car payment over the last 10 years. It’s probably the number one excuse I hear from people about why they have to have one as well. “Well, we need something more reliable for trips.” Enter the car rental option.
5. Rent a car for trips
I wish we would have learned this one sooner. Yes, when you drive older vehicles, the reliability factor is a big deal. There were many trips we didn’t make as a family because we didn’t know if our cars would make it. Some of our highest vehicle repair costs have come on trips as well. But don’t let one or two long trips a year lock you into a payment that will tie you up for years.
We started renting cars for trips. Even though our vehicles would be fine, we’ve also rented cars for one-day trips down to Denver and back, or some regional things a few times.
I just researched a week-long reservation at Hertz car rental here in Cheyenne. We can rent a brand new Minivan for $417 for one week, unlimited miles. If anything happens on the trip, Hertz fixes it, not us. We get all the bells and whistles for a road trip, a one-time payment of $417, and we come back to fully paid for vehicles at home.
What most people pay every month for six years, we choose to pay one time as needed and save thousands of dollars in the process. This last summer, Sabrina and I rented a full-size car here in town and fulfilled one of our bucket list items by driving to Vegas for a few days and driving back. In case you’re wondering, you can book a full-size car at Hertz for a week for $201.
Renting cars as we need them has become one of our biggest allies in overcoming the car payment trap. By renting, we get the most reliable vehicle possible with little to no risk and zero ongoing costs when we return. Don’t let your need or desire for a road trip lock you into a payment you’ll regret six months from now.
You don’t have to have a car payment. If you already do, you don’t have to get another one. Make the choice today. Which one of these things do you need to start doing? Live on less than you make (use a budget). Make savings a priority. Choose to live a debt-free life. Lower your standards. Rent for trips.
I’m sure there are many other tips, tricks, and reasons why you don’t have to have a car payment, but those are the ones that stuck out from my own life. I pray this helps someone make the necessary steps to a whole new way of living.