Staying Off the Car Payment Treadmill
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.
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?