Staying Off the Car Payment Treadmill

January 6, 2010 by  
Filed under Loans and Borrowing

Mr. and Mrs. ToughMoneyLove do not like car payments so we don’t have any. I don’t understand the logic in borrowing money to purchase a depreciating asset.

Car payments are particularly problematic for many people because once they start making them, they never stop. When their vehicle gets some age on it, they trade it in for something newer and for another set of payments. Car payments become a permanent part of their financial life. That’s bad news. The good news is that our national love affair with cars may be diminishing.

Years ago we had car payments. We learned quickly that we needed to get off the car payment treadmill and stay off. Here is our strategy for doing that.

1.  Pay cash for your vehicles. Yes, that’s a “duh” statement. So let’s move on to how that can happen.

2. Buy and hold. We buy used cars for my use. My current vehicle is a 1999 model that we bought (for cash) off lease in 2002.  It has 105,000 miles on  it.  We have purchased three new vehicles for Mrs. ToughMoneyLove over our 32 years of marriage because she has been the primary kid transporter. The first two were minivans, each of which we drove for 140,000+ miles then donated to charity at the end of their useful family life. Her current vehicle is a 1999 SUV with 130,000 miles on it that we bought new (for cash). Both vehicles have been well maintained, look fine and run great. I expect each to give us at least another 50-60k miles of reliable service.

3. Buy enduring style and quality. Many people put their money into superficial technology and flashy or trendy vehicle designs.  Sooner rather than later these owners tire of their vehicles and dispose of them long before the vehicles are physically “used up.”  Sometimes all of that fancy dashboard technology becomes a maintenance burden. This causes the buyers to get back on the payment treadmill. We prefer vehicles that are well-designed from the inside out, are built to last well beyond 100,000 miles, and have classic styling that does not look dated in three or four years. Like most of you, I would dislike driving around in an older vehicle that was rusty or that rattled and smoked its way down the highway. Our vehicles – even after ten years and many miles of use – don’t have those problems. I’ve been in many cars much newer than mine. I wouldn’t trade for most of them. There are brands and models at all price points that consistently provide that quality. Find them and keep them.

4. Accept that a vehicle is not a status symbol. A lot of vehicle owners get on the payment treadmill and stay there because they consider their vehicle to be a valid representation of their status in life. Big mistake. Can you name a friend or family member that you genuinely like more because of the vehicle they drive? I hope not, because that says more about you than about them. Money envy and conspicuous consumption are not characteristics to emulate.

5. Maintain your vehicle. This sounds like another “duh” statement but not really. I often hear folks rationalize the purchase of a new(er) vehicle by reference to the maintenance costs of their present vehicle. Most of that is baloney. It is almost impossible to pay more to maintain a quality vehicle than to buy and depreciate its replacement. (Here are some other lame excuses for buying a new car.) Whenever I begin to cringe over a repair charge for one of our vehicles, I think of that payment as just a fraction of what it would cost me to buy something else. I also think of the appreciating assets we have been able to accumulate over the years with money we have not spent on car purchases. The cringing stops.

6. Save for the next vehicle. To stay off the payment treadmill, you need to save for your next vehicle purchase. This is critical. It is a lot easier to do when you are driving your existing vehicle for ten years or more. Plan ahead from day one of vehicle ownership toward buying a replacement. Start a CD ladder or similar 5-10 year investment/savings vehicle to use for vehicle replacement and repair. Use a savings goal calculator to determine how much you need to set aside each month.

That’s what we do to stay off the car payment treadmill. What about you?

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18 Responses to “Staying Off the Car Payment Treadmill”
  1. andyg8180 says:

    Thanks for the wake up lol… i’ve been contemplating a new car purchase because i have shocks and timing belt/water pump due… Nothing wrong with the car at all, just felt like something new… Thanks for the reminder lol…

  2. Gail says:

    I’ve always been a big believer in hanging on to a car as long as possible. I’ve only purchased 3 cars in the (almost) 30 years I’ve been driving. The first was used and the second 2 were new. The 2 new ones were both financed, and I can vouch for the constraints monthly car payments make on your budget and ability to save for the future. They’re a major bummer, but I completely agree many people can’t imagine life without them! Don’t even get me started on leasing. Personally, I think a majority of new car purchases/leasing are irrational decisions based on emotion rather than sound financial logic or practicality.

    My current car is a 2001 Honda Civic and I’ve been completely satisfied with it–plan on keeping it for another 4-5 years (only has 25K miles!) But I learned my lesson from years of car payments and am currently saving up cash for my next vehicle!

  3. Evan says:

    I go back and forth on this topic in my mind and I think it has a lot to do with being on that treadmill mid-marathon. I doubt I’ll ever get The Wife off leases, but I am financing my car and doubt I’ll have it for the 10 years you speak of so it feels like if I am always going to have a payment (took a 7 year finance) then I should at least get a new car now rather than later, or at least when the car isn’t horribly underwater.

  4. MasterPo says:

    My current car, a nice SUV, will be 10 years old come March. It’s still in better-than-average shape and still gets the same mileage as when it was new. I have spent more in the last couple of years in maintenance and repairs but that’s to be expected IMO.

    I have no plans on buying a new car, SUV or otherwise, any time soon.

  5. TMN says:

    I’m getting closer to giving up owning a car all together. The expense of insuring and parking it alone is roughly equal to what it would take to replace it with taxi rides, zip car, and traditional rentals (given how much I use it). When you factor in maintenance and eventually replacing it, there’s no question that it’s cheaper not to have one in the first place.

  6. JimmyDaGeek says:

    #6 is key and very hard to do. Instead of buying the car and figuring out the payment to the bank, why not pay yourself and get the interest?

    • MasterPo says:

      2 reasons I can think of:

      1) At 1% or so in the bank? Not worth it IMO.

      2) Life seems to “know” when you have cash in your pocket. Sounds easy enough to say “I’ll pay myself back instead”. But when this or that happens the temptation to forgo a payment then another then another and so on is too great.

      The often mentioned “disciplin of debt”.

  7. David says:

    I agree 100% with your comment on this. I have never owned a new car. My current vehicle is a 1991 Toyota Corolla that I purchased several years ago, and I have to say that it has been the most reliable car that I have ever owned. I have gotten more than my $4500 worth out of it! It has needed some work here and there, but nothing major so far. I have no intention of ever buying a new car, as to me, a car is a means of getting from point A to point B.

  8. Alison says:

    We’re in the market for a new to us car (a family car that’s larger than what we currently have), but we don’t want a car payment so we’re trying to save as much as we can before we need that new car. We’ve always paid cash for the cars that my husband drives. We look for 10+ year old Toyotas and Hondas with mileage in the low 100,000s (we drove our Honda Civic until it was close to 200,000 miles, the only reason we sold it was that we were moving across the country and couldn’t take both our cars with us).

  9. Rick Beagle says:

    There is a lot that I agree with in your post, but it seems irresponsible not to recommend a more thorough review of any potential ROI. Aside from the usual partisan bickering (which I am an admitted frequent participant), in my humble opinions, folks need to to a review of their “real” lifestyle” to determine when and what type of car to buy.

    It has been a few months and already folks are forgetting the spike in fuel prices, and predictions that they will continue to climb. Energy, in all its forms, is a variable expense, and one could easily predict with amazing accuracy that it will continue to climb. Most of your utility companies already have plans on the table to reduce their dependency on foreign oil, reduce their energy consumption, and generally do what they can do try and insulate themselves from what everyone should know is coming (incredibly high oil costs).

    While this technology might raise prices in the short term, much like the Honda and Toyota buyer above, over the long run we will be happier we went down this path.

    Rick Beagle

    PS Please support/encourage your local utility companies to diversify their power production portfolio to minimize their exposure to imported oil prices.

  10. MasterPo says:


    “folks need to to a review of their “real” lifestyle” to determine when and what type of car to buy.”

    So what about if *I* determine that MY “real lifestyle” is best supported by a V6 4×4 SUV?

    You good with that?

    • Rick Beagle says:

      If that is a viable solution for you, then no, I personally have no problem with it. If it runs a deficit in your budget greater than your means, then welcome to the world of money fools.

      The point is, gasoline/oil prices are going up, and before we close the book on the purchase of a new car (lease, pre-owned, whatever)- it seemed prudent for people to crunch the numbers. Say for example that Humvee in your driveway may not be economically viable now that your commute has quadrupled and your pay has been halved. Perhaps for that Humvee owner, a prius could be a smarter choice?

      Rick Beagle

      PS. Nice try at

  11. red rabbit says:

    My last car – cash-bought low-mileage used – was 21 years old and had 316k miles on it. When it could go no further I donated it to charity. I expect to still be driving my current car (also low-mileage used) for the next 20 years.

    I see people who buy (finance) new cars every 3-4 years and just shake my head. I just can’t fathon being dumb enough to pour that much money down the drain just to impress a bunch of strangers.

  12. cjbr549 says:

    I am in full agreement with the post. One thing that I will add is that if you are able, doing some of the maintenance yourself can be a huge cost saver. I’m not talking about rotating tires and changing oil, you can get that done by someone else for $20. I’m talking about brakes, suspension, cooling system and minor electrical troubleshooting. These will generally require the purchase of a model specific shop manual for $150-200, and some tools, not more than $200 worth. These types of repairs are the money makers for shops, and the money spent on the manual and tools will pay for themselves on the first few repairs. I realize this isn’t for everyone, but if your handy, it can sure save allot of money. I do nearly all the maintenance on our vehicles, and the few times that I have taken it to the shop for something besides an oil change I have been disappointed with either the price (because I knew how much time it should have taken) or the performance or both. By the way, I have a 2001 Pontiac Grand Prix with 185k miles on it that I bought new. Not the best car in terms of reliability but I must say GM’s repair manuals are top notch.

  13. FBS says:

    In 1997, I bought a used Jeep Cherokee 4X4. I needed it for my weekend activities but rode my bike to/from work. I still own that car and can’t imagine parting with it. I paid cash so have never had a car payment on it. It has 235k miles and my mechanic says to keep driving it. I’ve had to replace or fix the usual small stuff but the engine and transmission keep on ticking. I don’t plan to replace it until they have to pick it up from the side of the road. Instead of car payments, I have totally maxed out all of my retirement accounts over the last 19 years. I think constantly replacing perfectly good cars for no reason is as stupid as buying thousands of pairs of expensive shoes or handbags. I’m also very close to having a debt free house since I didn’t succumb to the “upscale” trend of recent. They used to make fun of my miserly ways ……. not so much now. I will retire in 4 years and be able to enjoy myself.

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