How to Have a Car Without a Car Payment

How to Have a Car without a Car Payment


          Wouldn’t it be nice to NOT have a car payment ever again?  Impossible?  Not really.  I haven’t had a car payment in over ten years; I promise, I’m not driving a nasty old beater car either!  When I became serious about being debt free, that meant I didn’t want a car payment.  My husband, Nick, has always paid cash for his cars, and that was one of the things I admired about him when we were dating.  He had the discipline to save up and pay for the things he wanted – including his vehicles.

            The last car I had with a payment was a Toyota Camry that my godfather sold me.  It was definitely nice of him to let me make payments directly to him instead of having to go the bank financing route.  Since I worked for him at the time, he knew where to find me if I was late on a payment!  😉  Once my Honda was paid off, I could have traded it in and got myself into a new car with a hefty payment.  But I decided that I was finished with that way of living!  Instead, I continued to drive my paid-for car and began piling money into my “New Car Fund” savings account.

            After two years, I had piled up $14,000 in cash and had my eye on a 2005 Hyundai Sonata.  I loved the Jaguar-like styling of the Sonata and the 2006 models were just released, so I knew I could score a deal on the 2005’s that the dealers would surely be trying to get off of their lot to make room for the new model.  I actually had all kinds of fun negotiating a deal on my Hyundai.  Because I had cash and my Toyota was still running fine, I wasn’t about to be pressured into a deal that wasn’t for me.  After the deal was done, the salesman complained that I negotiated down so much that his family was going to have to eat Ramen noodles for the next month.  (Car salesmen can be so dramatic!)  Nick took over driving the Honda because it was worth more to us than the dealer wanted to give for a trade, which is not uncommon.

          I am still driving my 2005 Sonata, almost nine years later!  I’ve taken great care of it and it only has 86,000 miles on it.  I have plenty of money of piled up in my “New Car Fund” but I’m just not ready to make a deal on a new Sonata yet.  Maybe in August or September when the 2015 model comes out, I’ll be poised to make another sweet deal on a 2014.

          “Well, that’s nice for you,” you might be saying. “But what if I have a car payment right now? How do I get to the point of being able to buy a car without a payment?”  First, make a plan to pay extra on your principal so that your car is paid off ASAP!  Once it’s paid off, take that car payment and put it in your “New Car Fund” savings account.

          The average car payment is $450 per month, which is $5,400 per year.  Even if you have some repairs to your paid-for vehicle, you should still be able to sock away $5k per year.  After one year, you could sell or trade in your paid-for car, add the proceeds to the $5,000 and buy a decent used car for cash.  You can continue to do that year after year, upgrading cars with the cash you’ve saved instead of having a car payment!

          With a little patience and discipline, you too can have a car without a car payment.  Do you have a car loan or lease payment right now?

Comments 27

  1. We have no car payments – life is so good to be debt free! I drive a Jeep Grand Cherokee and my hubby drives a RAM 250 diesel truck. I tell people it can be done with planning – easier than you think.

  2. I will never have the kind of patience it takes to save up cash for a car. After my car was totalled by an inattentive driver last year, I had to get a new one. Ok, I could have gotten a used one but didn’t 🙂 So yes, I have a car payment.

  3. Very inspring! With two years of payments left, I could manage paying more than the minimum. I too, drive a Toyota, so I’m sure it will last me a few years after it’s paid off. Jaguar, here I come!

  4. We recently bought a truck on payments for the first time in years. We always paid cash. I admit we wont owe long, but I know I don’t like having to make payments at all.

    1. Post

      Yes, I learned from the best! I received my Financial Coaching certification from Dave Ramsey. 🙂

  5. My great grandfather used to use cash only to buy all his vehicles. I think it’s a great idea and might try a New Car Fund myself. I don’t have a payment now and I’m hoping to scoot out of a mini-van next time we buy. I’d be incredibly proud of myself if I got my act together enough to pay cash upfront!

  6. One of mine is ten years old and the other is sixteen years old. I love not having a car payment. I’ll definitely be paying in cash for my next one.

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      Good for you Tracy! You’re saving a ton of money by not having a car. Unfortunately, in the ‘burbs of Cincinnati, I don’t have that option! 😉

  7. We had our cars paid off but we had another baby so we outgrew our mini van and then my husband got into a car accident and he needed a new car. Boom now we have 2 car payments again, we are working hard to get them paid off.

  8. My car is paid off. I would love to get a new CAR. I currently drive an explorer and get a whopping 14 miles to the gallon. But they thought of car payments makes me stop and keep my SUV.

  9. We have never had car payments either. That was probably one of the attraction factors between my husband and I… neither of us have ever had any debt and don’t plan on acquiring any 😉

  10. Luckily, all of our cars and bikes are paid off. My husband is quite smart with money. So I have him to thank. These are really handy examples though. Good for you for being this way. It’s definitely not easy.

  11. Hubby needs a new car, and we won’t be able to save up as much as we need in time. But we are working to make sure the payments are low.

  12. Do you have kids? Gone are the days of buying cars with cash in this family. We save up for a down payment and try to NEVER go above the 300s for our monthly payment. That’s amazing that you can do that! WOW!

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