A Life Without Debt: The Debt Free Car

One of the items that people most frequently go into debt to purchase is a car. That’s not surprising given that even the most basic brand new car begins around $12,000. And that’s for four wheels and a seat; no extras or room for many passengers. Most people don’t have that kind of money lying around unless they’ve made a concerted effort to save for the day they need a new car. Most people just assume that a car payment is one of those things in life that they’ll never escape, like death and taxes.

But it doesn’t have to be that way. We’ve always managed to have two cars with no debt. What is required is a change in expectations. I know I’ll never have a new car. I don’t want to buy something that will drop 30% in value the second I drive it off the dealer’s lot. And I don’t want to spend that much of my savings just so I can say it was “new” at one time. It’s not worth it to me. I would much rather focus my buying efforts on finding a good quality used car that is selling for a fraction of its true worth. A car is not about image, to me. It’s about having paid for, reliable transportation. Period. The fastest way to incur debt on a car purchase is to get mixed up in the idea that your car somehow says something about you. Trust me, it doesn’t. All a car says is that you can get from place to place. I also never buy more than I need. Why have a big SUV for a small family? Why load on all the extras if you don’t need them? Don’t need it, not going to buy it. That simple philosophy has saved me thousands in car money over the years.

I call my ideal car a “Grandma car.” These are the cars that are being sold by the heirs of an estate just to get rid of them. The heirs don’t care about getting the true worth out of the car; they just want to get rid of it and eliminate one more responsibility. Maybe the elder has died, gone into a nursing facility or simply can’t drive any longer. Whatever the reason, the heirs don’t want to deal with the car, so they unload it cheap. Usually these cars have been well cared for and driven very little. They are the ideal cars. I’ve driven some pretty impressive land yachts this way, complete with every extra offered. I may look strange, being a relatively young woman behind the wheel of a massive Crown Victoria, but it’s paid for and I could care less what people think.

Failing a Grandma car, I look for other cars that are well maintained and, for whatever reason, going for a song. I once found one being sold by a “car guy” who maintained that car better than any professional mechanic. It was a beauty. And he was asking about $3,000 below Blue Book. I asked him why and he said it was because it had been his son’s car and the son had died of cancer. He only wanted to get it out of his sight and sell it to someone who would give it a good home. I bought it for $3,500 less than Blue Book because the car guy thought I was a nice, sympathetic person who would cherish that car. I did. Private sellers are the place to look for deals, not car dealers. Car dealers usually want too much profit from their used cars. You can do better by scouring the classifieds and looking for someone just looking to unload a car cheaply.

In the beginning when we had no money we weren’t as picky about our cars. We just bought the cheapest thing we could find that ran. In other words, a Beater. My first car was a cast off from the state’s vehicle fleet. That Chevrolet Citation was a piece of work. It was eight years old when I got it and had over 100,000 miles on it. The engine groaned when you put your foot on the gas and if you went over 55 MPH, it shuddered and rattled like it was going to come apart at the seams. It had no extras and AM radio only. It cost $1,500. But it ran and got me to and from work and school safely and reliably for four years before finally kicking the bucket. But after four years, I had saved enough to “trade up” to a used Ford Taurus. Compared to the Citation, I was living the high life. I’ve traded up a little every time I’ve bought a car and I no longer need to look for Beaters, but I still don’t spend any more than I have to to get a solid, reliable used car.

The trick to buying cars debt free is to always be saving for your next car. Buy something very cheap in the beginning and then start the car fund. You know you’re going to need one at some point, so start saving for it the minute you buy the current car. If you keep the current car until it dies by the side of the road, you’ll have many years to build up a replacement car fund. Save often and aggressively and you’ll probably be able to afford something a bit nicer each time you buy, especially when you add in the money you’ll get from selling your current car. If you search for a great deal, don’t buy more than you need, and haggle well, you’ll probably have a little of your savings left over as seed money for the next car.

Basic car maintenance skills can be helpful in keeping free of car debt. If you are buying older cars, there is a chance that some things might need replacing sooner rather than later, like brake pads, belts and hoses. If you can do those repairs yourself, you’ll not only save yourself a lot of money, but you’ll take some of the anxiety out of owning used cars.

A final note: Buying good used cars will save you in other areas, as well. Insurance rates are often much lower on used cars. And, since older cars aren’t as attractive to thieves, you’re less likely to have theft problems, as well. Owning a car outright is far preferable to making payments. If disaster strikes and you lose an income, a paid for car will still get you to work and interviews. It’s yours and they can’t take it away, even if it’s the ugliest thing out there. If you lose a financed car to the repo man, you’re hosed. Plus, with a paid for car, you can sell it if need be and pocket the funds.

It’s a myth that you have to go into debt to own a car. But you do have to learn to buy smart and to adjust your expectations. Cars are transportation, no more and no less. A Beater car will get you to the same places as a a shiny new car for a fraction of the cost. If people think you’re strange or the devalue you because of your car, you don’t need them. Just buy a car and leave the image and ego out of the equation. You’ll save a fortune and keep yourself out of debt.

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9 Responses to A Life Without Debt: The Debt Free Car

  1. John says:

    Great blog. Over here in the UK only the rich (or stupid) buy a brand new car! Go to a dealer and get a secondhand car with 1 year guarantee.

  2. lizajane says:

    I love my auction-purchased Crown Vic! Can’t beat the police special heavy-duty frame, transmission and all the other extras. I’m sure it doesn’t impress others one bit, but it sure is a nice smooth ride, and it’s a nice-looking car to boot.

  3. I completely agree with you . One need not buy new car when we can get excellent used cars at a much better value . They offer superior value for money and are light on our finance s as well. Then start the new car fund and then see if you can afford it..

  4. Monkey Mama says:

    I guess the nice thing is that where I live there are a lot of Grandmas driving sporty cars. Seriously!

    In our teens we bought OLD cars (that ran well. My first car lasted 7 years). In our 20s we bought “grandma cars.” in the $5k range for cars practically new. I had only bought private party (wonderful experiences) but my dh would only buy from a dealer for whatever reason. I agreed as our expectations rose, because I felt less comfortable exchanging $10k+ with complete strangers. We have come to love the “1 at this price” deals at the dealerships. Dh’s car was very inexpensive but has been a dream. (less than $8k, practically new). I tried the method for my last car and also got a great deal. My DH wants to buy a new hybrid next (& drive it into retirement. The one new car my family did own lasted 20 years so we are not opposed to new).

    That being said, we only buy what we can afford to pay cash for. It is a very different way of thinking than the norm. We settle on the colors and features available. Obviously it is worth the money saved. We’ve never had a car payment, but as our income and savings grow we have been able to buy up each round. That being said, but for dh’s hybrid dream, I think we’d be content to drive Granny cars forever.

    WE aren’t handy but we don’t spend a lot of money on car repairs. Replacing car parts with age is inexpensive. I’ve driven cars as old as 20 years and never had more than a few hundred dollar repair bill. Maintenance is key (simply regular oil changes, checking fluids, taking car in for any signs of problem, that’s all there is to it). The cost of maintaining an older car should be pennies compared to buying a replacement.

  5. EEinNJ says:

    I’ve followed a similar strategy and haven’t had a car payment in 12 years. I learned my lesson on a 400/month lease, which was a steep payment in 1995. Ever since I’ve saved $400 a month towards my next car. I started with Saab 900 Turbo, then a Subaru, another Saab, now a new Miata.

    A used car is not much cheaper, though, when you factor in repairs as they get older. If you get a real dog, as I did with a GM Saab, the cost advantage disappears.

    Still, if you plan ahead and save your money, eventually you can buy a nice car, new or used, and stay debt free.

  6. Marie says:

    We own both our cars outright. We were a one car family with two kids for 7 years. Right before we had kid #3 someone was unloading a minivan (a retiree drove it) for a song. In this state you also do not pay sales tax on vehicles purchased from a private seller. Automatic 8.1% return on the investment :).

    Most people here are excited to get rid of their car payments, it means they can go get another new car with its own payment. I don’t get it.

  7. Jackie says:

    I’m excited, I’m very close to paying off my car about 2-3 years early. I would like to put the $$ towards saving for my next car, but my next big goal is a down payment for a house so it might go there instead. My parents always paid off their cars early then continued to make that payment into a savings account for the next car, until they got ahead enough that they always pay cash now whether they buy new or used. 🙂 Great, real life examples that it can be done.

  8. Paula says:

    Great post! DH and I have always owned cars that we paid cash for, whether they were “beaters” or not. Growing up, my parents never had money, and so always had old cars that my dad fixed up and ran till they died. Recently, my father finally bought himself a new truck that he paid for in cash after he negotiated a nice deal.

    Having said the above, I also can understand people buying nearly new vehicles that they make payments for and drive for years. Just this past month, DH and I decided to upgrade to a “newer” vehicle as both of ours were sixteen years old and we have a son with special needs and live in the country. So, we made the decision to buy a two year old economy car for my husband to commute with (making low monthly payments) and for me to keep my 93 wagon for a little while longer, saving for a replacement for that when the time comes. (While I would love to own just one vehicle, both DH and I work full time in a rural area and have different hours, with our son being in school part time and daycare the rest.)

  9. We own both our vehicles outright. Paid cash, bought them both the same day. We now have CDs put back to replace these two, and another CD for the next car after those two. We’re saving up for the next CD to make it a matched set! 😀

    We’ll sell our cars outright and then look for used again.

    Living below your means? A good thing!

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