Why I’ll Never Have Another Car Payment Again

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I’ve committed to not borrowing to buy a car ever again. Read on to learn why paying cash for a vehicle has become a financial priority for me. 

At the beginning of 2023, the average monthly payment on a financed new car was $703. And, as Edmunds reports, the average monthly payment on a financed used car was $565.

That’s a lot of money to have to pay out of your checking account each month. Such a big payment makes it harder to live on what’s left, which means falling into credit card debt becomes more likely.

While having a car payment is very common, I do not currently have one and I’ve vowed never to have one again. Here’s why I won’t borrow for a car — and the steps I took to make sure I didn’t have to.

I don’t want to pay interest on a car that goes down in value

The biggest reason why I’m not interested in having a car payment is because I know cars quickly lose value as soon as you start driving them. A car I buy for $20,000 today will be worth $10,000 in a few years — if I’m lucky.

So I’m already buying something that’s not going to increase my net worth but that will instead leave me with an asset that’s worth much less than I paid for it. I don’t see the point of paying interest, which will only add to the cost of the vehicle. Why pay more for something that becomes worth even less every day you use it?

I don’t want to commit my future income to a purchase I’m making today

Another big reason why I don’t want to have a car payment is because I don’t know what the future holds. I don’t know if my income will change, or if I’ll decide to make other big purchases that will eat up my income, or if something else will happen that makes it difficult for me to make future car payments.

I don’t want to commit my future self to a responsibility that I may not easily be able fulfill — especially since doing so could limit the options I have later on. Since car loans can take years to pay back, I’m just not comfortable taking on this kind of commitment when I likely wouldn’t be able to easily get out of it by selling the car. It could easily end up being worth less than the amount due on the loan.

I’d rather pay for the vehicle upfront before I drive it off the lot, so I’m not stuck with monthly payments for several years that may become uncomfortable to pay.

My no-car-payments technique

While there are clearly good reasons why I decided not to borrow for a car again, the reality is that having a vehicle is a necessity for my life. That means I had to find a way to implement my plan to avoid auto loans.

To make this happen, here’s what I did. I paid off the loan I had originally taken out on a vehicle. And then I continued to drive that car for another 10 years. After my loan had been paid off, I continued making the same monthly payment that I had been making. The difference was, I put this money into a savings account.

When my trusty vehicle finally became too expensive to repair, I had tons of cash in my savings account that was ready to be used to buy a new vehicle. I paid cash for that car, then resumed my “car payments” to rebuild my savings account so I’ll be ready for the next time.

The reality is, avoiding a car payment does make sense in many situations when it’s possible to do so. Consider following my lead and continuing to drive your paid-off vehicle for as long as you can while saving for a new one.

You’ll likely be very happy when you can pay cash for your next car — and have extra money in the bank, since you won’t be spending it on interest for an auto loan!

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