Everyone wants to reduce or eliminate their monthly car payment. But how? This post will show you a fast, guaranteed way to eliminate your monthly car payments.
The Easy Way To Reduce Your Monthly Car Payments To Zero
The easy way to reduce your monthly car payments to $0 is to buy your car with cash. That’s right – no bank or credit union financing. No dealer financing. Just cold, hard cash.
Some of you might be thinking, “That’s all well and good JD, but the average price of a new car in 2019 is more than $34,000. Even if I wanted to pay cash for a car, I don’t have that much cash lying around. So, as you can see, I have no choice but to finance a car.”
Wrong. You do have a choice.
You want to buy a car that costs $34,000. You don’t have $34,00 in cash. Guess what, you can’t afford the car. Simple as that. Buy a cheaper car with cash.
There are plenty of safe, reliable used cars on the market that can be had for less than $10,000. Of course, you can pay more for a luxury car, big SUV, or sports car, but you don’t have to (wants vs. needs).
4 Benefits To Buying A Car With Cash
There are at least 4 big benefits to buying a car with cash: (1) avoid paying interest; (2) increase self discipline; (3) save money on the purchase price; and (4) avoid buying too much car. Let’s quickly review each in turn.
1. Avoid Paying Interest
A good financial rule of thumb is to never finance a depreciating asset, like a car. This is especially the case for new cars.
Not only will a new car lose a huge chuck of its value the second you drive it off the lot, you’ll be paying interest to a bank for the privilege.
Paying interest on a depreciating asset, especially when you owe more than what it’s worth, is not a recipe for financial success.
2. Increase Self Discipline
It’s not easy to fork over cash money for a big purchase like a car. That’s why so many people finance a car.
Instead of doing the hard work of saving up money for a cash purchase, the average person will take out a 72-month loan and get the car they want right now.
So, buying a car with cash will increase your self discipline. It will force you to develop a plan to save money and then execute.
3. Save Money On The Purchase Price
We’ve all seen those TV ads where the car salesperson says something like, “$3,500 cash back or 3.9% financing for well-qualified buyers.”
Dealers know that virtually all buyers are going to finance their cars so they don’t lose sleep over having to actually pay out the $3,500.
But, guess who does get that $3,500 discount?
Cash buyers like you.
4. Avoid Buying Too Much Car
9 times out of 10 people buy “too much car” because they finance the car and only consider whether they can afford the monthly payments.
It’s quite common for people to buy a car based exclusively upon the monthly payment amount. They give only a passing thought to the purchase price of the car, let alone how much interest they will need to pay the bank.
Car dealers have all sorts of gimmicks to keep monthly payments low while increasing the car’s purchase price.
Don’t play those games. Pay cash.
The 0% Interest Argument
Some people will say, but what if instead of paying cash I finance a new car at 0% interest? I could then take the cash I would have used to pay for the car and invest it in the stock market. That way, I’ll come out ahead financially.
Again, no. Pay for your car with cash.
A lot can happen over the course of a 3-6 year period. You could get laid off. The market could tank. You could have a child.
There’s little reason to tie yourself to a large monthly payment when you don’t have to.
Do You Even Need To Buy A Car?
Finally, consider whether you even need to buy a car at all.
Maybe you can use public transportation. Maybe you don’t really need to be a 2 or 3 car family. Maybe you can rent a Zipcar or Turo when you need to run certain errands or go on a road trip.
After all, there are many ways to get around and meet all of your daily needs that don’t require you to purchase a car.
All the best,
JD
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