Car Payments: Just a Part of Life?

In June, I had the pleasure of finding out that my car of 5 1/2 years, and recipient of mountains of maintenance costs, had a transmission that was ID-10098865going out on it.  This led to the decision to purchase a new car a little earlier than we had been planning.  During this search, I was introduced to some “advice” from a car salesperson that I couldn’t believe and truthfully, was saddened to hear.

While looking at a couple vehicles at a dealership, we decided to get pricing on one.  As my wife and I were discussing what we were looking for and our price range, our car salesperson tried his normal tricks at trying to get us to buy more car than we were looking for.  He completely ignored the out-of-pocket cost range that we were looking for and tried to push us up to the longest term loan they could offer.  His reasoning for doing this?  Well, “A car payment is just a part of life.  It is another line on the budget.  I figure that I will always have that car payment sitting there so why try to avoid it.”  This was the point that I completely checked out of the conversation, gathered our items, and left with the wife.  I couldn’t believe what I had just heard and was frankly saddened that this was the type of “advice” that was being given out.

This type of mentality is something that I hate.  The idea that “debt is just a way of life” and “if I can’t afford something, I will finance it” are some of the most troubling ideas in our day to day society.  Just because the ability to take a larger loan and pay it over a longer period is there, shouldn’t mean that you now have the ability to purchase something you otherwise couldn’t afford.  According to Experian Automotive, in Q4 of 2013, the average new loan balance crossed over $27,000 for the first time, while the use of 6 or 7 year terms hit a record 20% of all new loans.  This data correlates perfectly with what I saw during our car search.  Between the audible gasps when I informed our salesperson that we would be putting down 50% cash and the “advice” that we should buy more car than we wanted since they could offer us more financing and a longer term, my eyes were opened to the types of challenges out there.  But these are challenges that can be avoided.  Saving money for big purchases and not taking out extra debt just because it is offered to you are great ways to set yourself up to succeed financially.

Debt is not a way of life.  If your goal is to be financially independent or wealthy, a “keeping up with Joneses” mentality is never going to work, no matter what terms a salesperson is willing to give you.  We might not be able to change the opinion of those around us, but we know the secret.  Debt brings us down, while saving opens up countless opportunities.

Have you ever been told that debt is a way of life?  Do you finance or pay cash for your vehicles? Or a combination of both?

Photo Courtesy of: Stuart Miles, www.freedigitalphotos.net

Linking up with: Friday Jet Fuel

*Part of Financially Savvy Saturdays on Femme Frugality and
Debt Discipline*

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16 thoughts on “Car Payments: Just a Part of Life?

  1. My wife and I just went through this. We did get a vehicle that was a little newer and a few less miles than we could have gotten, but we drive our cars into the ground so it seemed like a good plan to get one that was reliable yet not brand new. We financed and got a ridiculously low interest rate. I much prefer financing if the interest rate is low because it frees up money to go into the stock market, where I get a higher return than the interest I’m paying.

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    • That is what we did as well. We put cash down to get the payment into the range where it would fit into our budget as we are working to pay down our student loans. Given the interest rate we got, it fit for what we had budgeted but we won’t end up spending that much in interest in the future.

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  2. Ugh, I hate it when people dish out gems like that, especially when it is purely for their own benefit. One good thing about cars is that sometimes the financing is at amazing rates, allowing you to redirect cash flow elsewhere.
    Nice work on finding something that works for you and your situation!
    Also – thanks for sharing your post in the Friday Jet Fuel link up!

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    • Rates are definitely a great thing about purchasing a car right now. It is nice to see rates being offered at 3%. Makes purchasing a car more affordable but shouldn’t be an invitation to continually upgrade a person’s price range and buy more car than they need.

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  3. Yeah, every time I drive by the dealerships on the way home from work, I’m always surprised by how low the bi-weekly payment is (especially on my “dream car” right now, the Hyundai Sante Fe). Then I remember that they have to be advertising the 6+ year long loans because there’s no way to buy a $30k car for $125/fortnight otherwise. The math just doesn’t work. But that’s how “everyone” thinks about it now – how big is the payment.

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    • Completely agree! I didn’t even realize there were greater than 5 year loans until we started looking. I’m sure the main reason was to be able to advertise lower payment amounts to bring more people in. Doesn’t hurt that interest rates continue to be low for a lot of people!

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  4. Hit to the point. Most of us just assume that we will live with borrowed money forever. I see people paying minimum due every month on their credit card. Knowing they will never be able to pay back the entire money, not in their life time. Pathetic situation.

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    • Exactly. I blame a lot of the issues on education. They see other people doing it and they really don’t know any better/don’t want to take the time to truly educate themselves and see that there is another way to live, debt-free!

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  5. It was a way of life for me until I moved to the city. Now I save $700 a month just on car payment, insurance, and parking (parking is $200 a month in my area). I think the problem is that people think they deserve a nicer car than they can afford. Nobody has ever taught them what income they need to have to justify every $10,000 of a car. Quite frankly, I don’t know the answer to that!

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    • I’m not even sure if they think they “deserve” one. I think it has more to do with the fact they can justify buying one when they are presented with a lower car payment since the terms are getting stretched out so much. Cars are such a status symbol so it makes it easier to justify when the loan gets stretched out but they don’t think about the total cost of buying it.

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  6. I he up being told education and houses were worth the debt. Passed on the student loans, but will probably finance a home. I prefer a loan to a beater. I find the maintenance costs and inconvenience usually are worse than a monthly payment. But it sounds like you guys were trying to take the middle road like I do. Sigh… Salespeople…

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  7. I had a friend that was in car sales – he was trying to sell me on the benefits of an 8 year car loan and convince me that we should trade in one of our “newer” vehicles for a brand new model. This was coming from a person that did not have 2 nickels to rub together. My car is 8 years old and I talk to her nicely and pray that she will hang on for a few more years.

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  8. We were lead to believe this when we purchased our home, you’ll grow into the payment. What? Guess who was telling us this, our mortgage broker. As far as car’s we are sticking to cash going forward.

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  9. Ugh, it saddens me to hear advice like that. Our cars are paid for, and I do not consider debt to be “just part of life.”

    We will be buying a new car next year, and will have to decide at that time whether we want to pay all cash or take out a short-term loan for part of it. But by short-term loan I mean no more than 1 year, and only if the rate is < 1%.

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