Never Take Out a Car Loan Again! (in 5 Simple Steps).
Posted: August 9th, 2011 | Author: Joe | Filed under: Saving, Tips | Tags: Auto loans, Buying a car, Car loans, Financing, loans | No Comments »It’s a well known “secret” that the average American cannot afford a new car . That article focuses mostly on the fact that people borrow way more than they should when buying a new car. But this post is about buying a car outright – with no financing. Very few people can afford to buy a new car without taking out a loan, but they would be better off if they could only figure out how to break the cycle of new car – new loan.
Matt Jabs shared his ideas on How to STOP Financing Your Vehicles at DebtFreeAdventure.com and it got me fired up on the topic again.
Regular readers already know that I learned a lot from my expensive mistake buying a car when I was younger. Mostly what I learned was how not to get entirely ripped off in the process. I thought at the time that it was used car salesmen that were out to rob you blind, but I learned that the new car salesmen can take a lot more without you ever really being aware of it – until it’s too late.
So, I learned what NOT to do when buying a new car. Years later, when my wife and I were expecting our 3rd baby and had to upsize our family vehicle, I put those lessons to work and shared a few more lessons I learned when buying a car.
But, if you click through to that last link you’ll notice while I didn’t get taken for a ride, I still had to take out a loan for the new car.
The truth of the matter is that getting off the financing treadmill is just not that easy.
Here are Matt’s 5 tips to stop financing your vehicles:
- Stop thinking you have to borrow money to buy a car.
- Aggressively pay down existing auto loans.
- Continue saving after the loan is paid off.
- Buy used.
- Save for repairs and maintenance.
To be honest, my wife and I did #2 and 3 above before we upsized our car… we just didn’t have enough time between paying off the previous loan and buying the new car, so we had to finance a good chunk of it. We also bought used. If it was just my car, I probably would have bought an even older car and financed less, but since it’s the family car and I would hate for my wife to break down in the middle of nowhere with 3 small children, we settled for a 2 year old vehicle. Most of the depreciation was over at that point also.
So, we’ve made progress in the process, but we’re not there yet. Hey, I said they were simple steps, not easy. 
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