Couple Money

What Would You Do If You Had No Car Payments?

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Looking at your monthly budget right now, what would you do if you had no more car loans?

For some couples that extra money could be used to pay down other debts or it could help fund a house down payment.

When we first married we had a car loan and I remember looking at the monthly payments wondering why did I sign up for it.

I had gotten the car loan before we were married after my other car was totaled in an accident.

Car Loans, Money Problems

I was a working college student with a very limited income. I had just been in an accident and the insurance company was going to send me a check for a little over $2,000 for the difference.

Instead of just being patient and finding rides to work and using that insurance check to get a commuter car, I went ahead and got a car loan with ‘small' payments.

It was a financially stupid move as it added another monthly bill to my tight budget and I had to get a co-signer.

Here are the ugly numbers:

That car payment alone was about 20% of my take home pay when I got it.

Fortunately my husband and I agreed that having this car payment was not in our best interest and we worked head to pay off the car loan early.

Basically we found learned to optimize our expenses. Some of our strategies included:

If you're curious about the specifics, please check out out above linked post for all the details.

Buying Cars with Cash and Taking Care of Them

After buying our family car this spring and getting my husband's car fixed this past week, we're hoping that the cars will last us for years as our most of previous ones have.

Honestly I hope we don't have to get another car loan, but the reality is that if we want to buy our next car with cash we need to plan now. That basically means that we need to:

  1. Set aside some money for the next car and,
  2. Maintain what we already have

As far as saving money for the next car we have a separate car fund started. When we decided that we needed a bigger vehicle last year we got aggressive with contributing it monthly.

Now that we have both cars ready to go we're a bit more casual about it. I make small monthly transfers to the account.

Once we sell the 3rd vehicle, that money will be deposited into the car fund. (We have a few other goals we'd like to put our energies into for now).

When the cars we currently own start needing repairs regularly and it looks like replacing them makes financial sense, we'll go back to save aggressively for our next cars.

Until then, not having car payments has given some freedom with our money, allowing us to pay down some debts and save.

Seeing that we keep our cars for a very long time, we’re trying to maintain our cars to the best of our abilities.

Neither one of us are mechanics, but we check the cars regularly for fluids, check tires, and when needed, we follow a regular maintenance schedule with mechanics we trust.

Buying a used car in most cases can make financial sense, especially if you're not heavily commuting.

For those one the fence on whether to buy new or used car, be aware that cars depreciate around 60%-70% in the first 5 years.

The longer we can go without car payments, the better for us as we can build a bigger fund for when the time comes to shop.

Thoughts on Having No Car Loan

I'd love to hear from you about car loans and your budget. How many of you have a car payment? How many of you have no car loan?

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