In order to produce the podcast and keep content up free for you, I work with partners so this post may contain affiliate links. Please read my full disclosure for more info.
Car loans are one of those debts that look sensible on paper (I need transportation!), but usually becomes an unnecessary burden. I learned this the hard way, but I’m glad I got the lesson.
Upgrading My Ride (and Paying Dearly for It)
From around 18 to 22 I had paid cash for my cars. They were definitely beaters, but they were fine for a college student getting around the city.
After awhile I felt like I deserved a newer car since I worked so hard and people were telling me how cheap it was to get one.
I looked around and found a used car for a good price, but it was still too much for my income at the time.
Bad Used Car Loan
Fast forward a few months later and I got into a wreck and my car was totaled by the insurance company. I got a check from the insurance company for a little more than $2,000 (the difference between my car loan and its worth).
I should’ve gotten a used car with that money and it would’ve been good.
Instead, I let ego and peer pressure to cloud my judgment again and I got another car loan, again with a co-signer. (When I say loaning money to family can be a bad thing, just understand I have been on both sides of the table.)
The payments were lower than my first car loan, but the interest rate was high (almost 14% ).
The $10,000 car that I bought would’ve costed me $15,962 if I paid it according to the car loan schedule. We paid it off early, but I still paid too much in interest and fees.
Didn’t Count the Total Cost of the Car
Instead of focusing on the monthly payments, I should looked at the big picture. Besides the car loan, there were some additional expenses with the car. What didn’t I take into consideration? Quite a bit in my hasty for an upgrade on my transportation.
What didn’t I take into consideration? Quite a bit in my hasty for an upgrade on my transportation.
- DMV Fees
- Property Taxes
- Insurance Costs
These were extra expenses coming out of my pocket that further depleted my finances at the time.
Happy to Be Car Debt Free
Having no car loan is a fantastic and while I do time to time want another car, I understand that getting a car loan is not the best solution.
If you’re looking to dump your car loan, find out how we paid off ours off.