Car Payments Are Not “Part of Life”

These last few weeks, I’ve been spending a ridiculous amount of time reading about the problems with the new vehicle shipping contractor.  In my reading, I have learned a lot about the different ways that people view their vehicles.  I have been very surprised at how many people are shipping “brand new” cars, very expensive cars, and even a “show car.”  (I’m not even sure what “show car” means, but that is a whole different topic.)

If you’ve been reading The Paycheck Chronicles for any time, you’ve probably figured out that I’m not too interested in cars.  For me, a car is a tool to move my family, my stuff and me from one place to the other.  It gets extra points for being reliable, comfortable, and economical.  My perspective has made it all the more interesting to read about people who are passionate about their cars, or have stretched their financial limits on the purchase of, or financing for, a vehicle.

One comment, in particular, really jumped out at me.  Due to the possibilities of delay and/or damage, one reader was considering selling their vehicle and purchasing another vehicle upon arrival at their new duty station.  In one of the replies, the writer was talking about the financial aspect of selling and buying again, and said, “Car payments are just part of life.

Dude.

Wrong.

I think this statement may sum up the crux of many people’s financial problems.  If you believe that car payments are part of life, then you’ll never take any action to put yourself in a position where you don’t have a car payment.  And if you always have a car payment, siphoning hundreds of dollars out of your budget each month, you have less money to build savings, pay off debt, and pay bills.

The average US new loan payment grew to $474 in the first quarter of 2014.  That is a shockingly LOT of money, especially considering that the average length of loan also grew, up to 66 months.  That’s a $500 commitment for five and a half years!  If you think this type of financial burden is normal, then the chances of you getting ahead go down dramatically.

As a country, we have got to stop looking at debt as normal, and auto loans are significant portion of the average American family’s overall debt.  If you believe that car loans are part of life, I encourage you to reconsider.  Even a move from perpetual car payments to having a break between loans will improve your financial life considerably.  If you are able to jump to the great place where you only pay for your cars when you have the money available, then you’ll probably have also broken the debt cycle in other places.  And that is a win, all the way around.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Will C

    I really hate articles like this. Yes, i know debt is bad; however, a bike or bus can’t get 20-30 bags of groceries safely to my house for my family of 5. I’m not a suppporter of 40k+ SUV’s but to enjoy simple things in America, a car is king…and allows you to make money beyond your community.
    Ex. A car allows someone from Baltimore city the opportunity to work in higher paid areas like Silver Spring, Ft. Meade/NSA/NASA or DC/VA.
    Yup, a car is necessary for living well off and a loan is the typical way we can afford to have one

    • Derrick D.

      Yes your right about the job opportunity. You make a good point about the article. I will say if your in business and I.T. then it’s very valid due to the area we live (DMV). Conversely we could also say because of the area we live if we were in the medical field we really wouldn’t need a car if we wanted to be a nurse, P.A., and Dental hygienist. There are so many hospitals that are always looking for those opportunities in Baltimore that a car is not needed to live and do your job. In addition if one had said job they could rent a zip car to go grocery shopping or a rental car for longer destinations that’s more economical (assuming you have good credit). While I agree that for certain people the statement is true and a car is needed; it is not a constant. Per the examples I gave above, this argument is subjective.

      • Will C

        The point I’m making isn’t the type of jobs but the pay scale. Baltimore City has the most well renowned hospital, Johns Hopkins. But the city has low wage scales so they pay less overall than what you would make in higher wage areas. A daily driver, not a rental, would get you to a higher pay area.
        I’m not an advocate for $400+ car payments but an inexpensive daily driver can broaden the reach of employment and culture, sightseeing, vacations, exploring, etc. America is about getting up and going; spontaneity; adventure.
        The article is about breaking from car payments, and we should if financially possible, but I believe the best way to become financially independent is to have a car…ergo car payment.

    • guest

      You actually can carry 15 bags of groceries on a bike, they have little tow behind carts. I use it all the time, I prefer the exercise. Loans however, ARE NOT the way to get a car. We’ve purchased perfectly fine new to us cars for cash, we’ve never had a car loan in our life (and our current car is a 2011 4Runner). It’s a matter of financial planning, buy a cheap beater, put the money that you would have been paying in car payments into a savings account, when the beater dies, buy a newer car in cash, continue that cycle and guess what? NO CAR PAYMENTs…saving, it’s a novel idea, I know

  • ken

    Many mortals who are not independently wealthy fail to see the connection of current consumption and expenses to their financial strength upon retirement, and live paycheck to paycheck. Reality will slap these in the face in the future.