Get Rid of Car Loans Forever

My spouse and I met in college and married shortly thereafter. During our 40 years as a couple, we have owned 9 cars, which surprisingly works out to one car every 4.4 years. It is surprising since we kept our cars for about 9 years each! The reason for the discrepancy is that we each owned a car at the same time, which we viewed as necessary in our part of the country as there is little convenient public transportation. Although we were lucky enough to get through college without debt (thanks Mom, Dad and scholarships!), we found that we needed two cars so that we could each get to our respective jobs.

I had purchased a used 1963 Buick Special for $400 cash in my Junior year – paid for from summer job income. Hubby, however, didn’t have a car. We both had poor paying jobs and lacked credit scores, so Hubby’s Dad co-signed a loan for the $2000 new Plymouth Cricket. We took out a loan, since we had zero savings and were way too independent to ask either set of Moms and Dads for money.

Here is our car ownership history:

Vehicle
Year Bought
Year Sold
Years Kept
1963 Buick Special
1969 1978 9
1971 Plymouth Cricket
1971 1983 12
1976 Chevy Pickup
1976 1990 14
1983 Plymouth Reliant wagon
1983 1991 8
1990 Ford Tempo
1990 1997 7
1991 Plymouth Acclaim
1991 2002 11
1997 Pontiac Grand Prix
1997 2006 9
2002 Dodge Caravan
2002 N/A 9 so far
2006 Toyota Solara
2007 N/A 4 so far

How we got out of the loan cycle:

For the next two years, we struggled to pay down that loan. We hated being in debt and hated having to pay the high interest. (This was the 1970’s when the country had 14% interest on savings and even higher interest rates on retail debt.) We kept that Cricket for 12 years, but paid off the loan in 2. We saved every dime possible that would have gone to the lender in the 10 years after paying off that loan and vowed to start buying cars for cash instead when we could.

Other things that helped:

  • We only had one car loan to start with, instead of two which made it easier.
  • We bought lower priced, no frills cars for the most part.
  • We bought cars with medium to lower fuel consumption needs to save money on gas to use towards the next car.
  • We considered cars to be transportation only and left our emotions at home when buying.
  • We kept the cars longer than most people keep theirs.
  • We kept our cars in the garage when possible – which made them last longer.
  • Until the 1990’s we did our own routine maintenance (oil changes, tire rotations, car washing, etc) – which helped us save money to use towards the next car.
  • We drove economically to save gas money to use towards the next car.
  • When our boys reached driving age, they borrowed our cars – we didn’t run right out and buy one for them.
  • When our boys were added to our insurance, they had good grades so we got lower rates to save money to use towards the next car.
  • After the cars reached a certain maturity level, we reduced insurance to just what was legally required – which helped us save money to use towards the next car.
  • After we paid off the loan on the car we were driving, we kept the car but kept saving the car payment towards the purchase of the next car.

We were successful in getting out of the car loan cycle years ago, but there are a few things I would do differently if I had only known then what I now know. We usually bought new cars from a dealer and we don’t dicker well!

What I now know that you can use:

  • Buy cars that are one or two years old (but have them independently inspected) – you lose a lot of money just driving a new car off the new car lot.
  • Buy cars from an individual seller (but have them independently inspected and make sure the seller has good title) – you will get a better deal than from a dealer.
  • Don’t trade your car in to the dealer, sell it yourself – you will get more.
  • Find someone to negotiate for you if you aren’t good at it – you’ll get a better deal.
  • Keep the car one year more than you think you can – save all payments you would have made that year towards your next car.
  • Try out only having one car in periods where that is possible. This is one we will be working on now that we are both working from home.

If we were able to do this back in the dark ages of the ’70s, I know that you can do it now. There are many more resources available today to check out various new and used cars for sale, as well as more avenues to sell your own car. We didn’t have the internet back then. Today you can check out the Blue Book value online, and visit Carmax, Edmonds and many other sites to learn about the features of various models and to comparison shop. There are also more public transportation and ride sharing options now if you wanted to delay the 2 car family situation to save up for that second car. You too can get rid of car loans forever if you make it a priority.

Marie writes at Family Money Values and the Family Money Values blog, which are intended to help families maintain and build wealth for generations. Visitors learn about wealth issues; wealth transfer tools; family structures to consider; and family and business governance concerns. Using money wisely, by eliminating high interest debt such as car loans was one wealth building tool Marie and her family used.

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