Car Payments Suck

car paymentThe other day, I shared how my minivan got a giant crack in the bumper (Greg probably did it) without my knowledge, and how we chose to ignore the Joneses and fix it with duct tape.  Despite the fact that I didn’t make any disparaging remarks about people who finance new or used vehicles, I received this comment:

 

 

Cars are for enjoyment. You can’t think it’s not okay to buy a car that you enjoy and drive every day of your life. You can’t take money with you when you die. Stop belittling people who buy things they want if they can afford it. I manage my $450 payment just fine thank you very much.                             -Anonymous

Defensive much?  Geez, you would think that I called his/her momma fat, slept with his/her little sister or brother, or stole his/her beloved family pet.  Note: Why does anyone care what I think in the first place?   Discuss….

Here’s Why Car Payments Suck

Anyway, I’m sticking to my guns on this one.  Car payments suck.  Even if you have an extremely high income and can afford it, paying several hundred dollars per month is rarely a good idea.  Here’s why:

  • Car payments are simply a way to buy something you cannot afford- Do you know why I hate car payments?  They allow people to buy things that they truly cannot afford, simply by letting them pay a monthly payment for anywhere from two to six years.  I’ve been there.  When I was in my early 20′s, I bought a brand spankin’ new Mitsubishi Galant for almost $25,000.  Could I afford it?  Hell no, I couldn’t!  I was working in a group home for $8.00 an hour at the time.  Fail!
  • You’ll never own anything- If you finance a car because of an incredibly low interest rate then invest your money elsewhere, I totally get it.  The only problem is, most people I know pay off their vehicle then immediately trade it in for a new one.  I’ve literally seen it happen dozens of times.  For some reason, having a car payment keeps people in the mindset that it’s “normal” or even a necessary evil.  Guess, what folks.  It isn’t.
  • Cars are a depreciating asset- When you buy a fancy new car, those $500 monthly payments might not be that painful.  But, look ahead a little.  Five years later, when your car is worth roughly the same amount as a Coach purse, you may feel differently.  Everyone knows that cars begin to depreciate rapidly the second you drive them off the lot.  Don’t compound that problem by committing to a huge monthly payment for your kid’s entire childhood- or worse yet- paying interest for the privilege.

Since I pretty much hate paying bills, it shouldn’t come as a surprise that I think car payments suck.  There are a million reasons I would rather just keep driving my beater minivan and banking the $300-$500 I’m saving each month by not having a car payment.  (When I do need a new car, I will buy a used model with cash)  I can also think of a million ways I would rather spend $450 every single month, including:

  • Investing it in Vanguard funds
  • Hosting an epic block party in my neighborhood
  • Saving it in my kid’s 529 plans
  • Investing it into writing for my other website
  • Taking my family to Benihana six times
  • Almost anything besides paying a car payment
  • I hate car payments

How about you?  Do you think car payments suck?  What would you do with an extra $450 per month?

 
About Holly

Holly Johnson is a wife, mother of two, and frugal lifestyle enthusiast. She is the co-founder of Club Thrifty and a staff writer at Get Rich Slowly, Frugal Travel Guy, and U.S. News and World Report's "My Money Blog." Holly has been featured in the Wall Street Journal, Kiplinger Personal Finance, Fox Business, and Daily Finance.

Comments

  1. Wow that comment seems a little off base considering what your post was about. I agree that car payments suck! No need to pay any more than necessary (interest) on something that will only lose value as you own it.
    Dee @ Color Me Frugal recently posted..Can You Afford Anything You Want?My Profile

  2. I don’t mind my car payment because it’s at a rock-bottom rate. I get a higher return in my 401k and it allows me to pay down higher-interest debt. If you can get past the psychological aspect it’s just a math problem and I think if you can get a low interest rate on a car loan you should leverage it. Not you personally, but people in general haha.
    DC @ Young Adult Money recently posted..What it Means to be a SolopreneurMy Profile

    • Unfortunately, the average person doesn’t use a zero percent interest offer to their advantage. They do it to buy something they truly cannot afford! Other than that, I agree with you.

    • I’m with DC on that one. Believe me I didn’t want a car payment and had been saving for a new (used) car but my car died on me way sooner than I’d hoped. I had no choice but to buy a vehicle, but with that said I bought the best car I could (mainly one that would hopefully run for a long time) at the lowest price I could possible find. I could have used my savings to pay for it, but that would leave me vulnerable if my work slowed down and it left me cash poor. Because of the interest rate on the car loan, I’d rather have that money in the bank.
      Tonya@Budget and the Beach recently posted..Sacrificing a Small Trip Today for a Big Trip TomorrowMy Profile

      • I guess I just hate car payments more than the average person, but I would probably just buy a cheap old car with cash. But hey, to each their own. It’s good that you had the money in the bank to pay for it if you wanted. You had options- you just chose the option that worked best for you.

        • Tonya did have a cheap car that she bought and ended up spending thousands on repairs–money that could have gone toward the purchase of her new car.
          I agree that car payments suck, but depending on each person’s circumstances, they can be necessary.

          • A necessary evil? Maybe in certain circumstances. I still think they suck. Of course, a $450 car payment sucks a lot more than a $150 car payment! =)

  3. I totally agree. I look at some folks who say they can’t help their kids with college tuition and a lot of them get new cars every few years. I want to say, well if you skipped a couple of new cars you would of been able to help them. But I don’t since I’m a polite person. Like you I prefer to do something else with that a car payment.

    The comment did make me chuckle. Obviously he/she cares what a few thrifty people think.

  4. As much as I love Benihana’s fried rice, I think having it six times in a month would be over kill.

    I don’t like car payments, but when you can borrow someone else’s money for 0% and get a much higher return somewhere else I am all for that (heck even capitalone360 is paying 0.75 so you already are winning there with no risk).

    • I agree with you, but the average auto consumer isn’t that savvy. Just last night, someone I am Facebook friends with posted a picture of their new SUV with something like “My new baby- It was cheaper to buy a new one than a used one!”

      That just goes to show that the average person falls for whatever gimmick the dealership is selling at the time.

  5. The internet is such an awesome place!
    I agree whole-heartedly Holly. I bought a Mercedes at like 28 because I had the “I grew up on welfare and deserve it” attitude. Now THAT is an #epicfail considering I had less in retirement savings than that car cost me AND basically spent almost half one years annual salary to buy it. I wish these types of blogs existed back then…I could have used a face punch for spending $450 a month.
    P.S. I am STILL driving that car…it’s 12 “ish” years old. She and I are “ride or die” now…lol!
    Car payments SUCK and I hope I can avoid one for the rest of my life.

    • That’s great that you’re still driving her. I wish I still had my old Mitsubishi. I traded it in for no reason but my guess is that she is still running somewhere!

  6. I understand the guy’s comment, but I don’t understand why he’s reading your blog. If a person is okay with the traditional personal finance model )i.e. max out your budget with financed goods and hope you have enough to retire before you die) then I’m okay with them making informed, albeit poor, financial decisions. Said person should not, however, be reading blogs about frugality and financial indepence.
    Chattanooga Cheapster recently posted..The Joy of Living Slightly Behind the Times – A Tale of Two LaptopsMy Profile

  7. I can get behind the 0% up to 1.99% financing. Especially since I currently don’t have enough money sitting around for a new car. That being said, my current car is 8 years old and I’m hoping to have it last for another 2 years, if not longer (pending major troubles). I’ll likely finance part of a new to me car but, after that I’ll save the payment after the loan is done (so say 5 year loan and 5 years after) and then I’ll basically have enough to buy it outright. Will I? I don’t know.
    Alicia @ Financial Diffraction recently posted..My Emergency Fund Is Fully Funded!My Profile

  8. I agree with you in large part, but I don’t think everyone who finances cars does it in the manner you suggest. My husband and I purchase used, reliable cars, and drive them until they’re no longer worth fixing. (We drove an Accord for 224,000 miles!) We often finance them, but we keep them as long as possible, well after they’ve been paid off.

    Like you, I cannot understand the mentality of buying a new car as soon as you’ve paid one off. But cars are purely utilitarian to me. I could care less about have the newest or flashiest model.
    Amy recently posted..Last Week’s Frugal HighsMy Profile

    • I agree that not everyone buys more car than they can afford or finances it unnecessarily. Unfortunately, a lot of people do!!!!

  9. As someone who bought a new car in October (and financed it!), I disagree with Anonymous; I didn’t feel at all belittled by yesterday’s article. Of course, I fully intend to pay this car off in about 3 years (as I’ve done before), and drive it for at least 10 (as I’ve done before). And hopefully this time I will be smart enough to get ahead financially, so I never have to finance a car again!

    That being said, people need to learn to own their decisions! I think when people do something just because that’s how everyone else does it, they get offended when someone points out it isn’t the best way. The boyfriend and I don’t intend to have kids, we have our retirement figured out, and we’re working on getting everything else in place; Financing a car isn’t taking away from anything else for us. If you’re financing a car every couple of years, and then complaining about the other things you “can’t afford”, you probably need to reconsider your priorities.
    Cindy @ GrowingHerWorth recently posted..What’s Your Retirement Dream?My Profile

    • We used to trade in cars every few years and I honestly don’t even know why. Boredom?

      • I kind of enjoy driving the same car long-term; I spend a lot of time in my car, and I like having something familiar. Most of the cars I’ve had I’ve kept until they were no longer worth putting money into. The exception was the Versa, which I never should have bought. Everything about that car was wrong for me, yet I bought it anyways. Live and learn!
        Cindy @ GrowingHerWorth recently posted..What’s Your Retirement Dream?My Profile

  10. I’m with you on this one, Holly. Your third reason is the kicker, for me: cars are depreciating assets. You’re losing money just by owning one. There’s no benefit from compounding that problem via compounding interest.
    Done by Forty recently posted..Anchoring in MontevideoMy Profile

  11. I always think it’s interesting when people finally pay of their car and then go right out and buy a new one! I’m a big fan of riding car payment free! I can’t fathom paying $450/month for a car, but I have friends with big trucks that pay $500/month or more. Yikes!
    Kara recently posted..Tips to Keep Your BBQ on BudgetMy Profile

  12. I understand the reasoning behind thinking it’s ok if you get a really good rate, I really do, but at the end of the day you’re still financing something. Plain and simple. That’s also not to mention the fact that most aren’t going to do what it takes to get that low rate. When we paid off our last car a little over two years ago we resolved to not have a car payment again, so far as it’s up to us as it’s just not worth it – for many of the reasons you listed. Some may feel they don’t have an option, but there are ways to deal with that.

    At $450/month you’re only $100 short of maxing a Roth. I would use it to throw more money in our SEPs, put money away for the kids, save for vacation…all more fun things than having a payment.
    John @ Wise Dollar recently posted..When is the Best Time to Buy Life Insurance?My Profile

  13. Normally, I would agree with you except when interest rates are so low. I can borrow at less than 2% and invest my capital elsewhere. Different than most, I keep my car forever.! Last car I kept for 17 years. My wife’s car is 17 years old with only 110K miles.
    krantcents recently posted..Why You Should Have a Financial Plan!My Profile

  14. Ooh evil car payments! I’ve been making them since I was legally allowed to borrow. Biggest mistake I’ve ever made. It’s such a waste of money. My car kicked the bucket on me and I had no money saved for a new one so I financed the purchase. Now I’m working all the hours I can to pay it off early. After this I’m done with car payments, I’m paying with cash!

  15. I’m with you on this one Holly as I think car payments are just awful. Having to shell out every month for a car for several years is just rubbish.

    I’ve been looking at buying a car recently and all the sales people could tell me was how much it would cost to finance it every month but when I asked what the cash price was, they didn’t know and had to go check in a file in their office!
    MrsFinancialFreedom recently posted..Fixing My Leaky Money Bucket: Part OneMy Profile

  16. Thank you for addressing this. It’s ridiculous. Nice explanation.
    Natalie @ Financegirl recently posted..How To Alleviate Your Money Anxiety: A “Mad Men” Inspired PostMy Profile

  17. I have a tiny car payment, and I’m ok with that. My original plan was to buy a used car, but that turned out to be a disaster, so we went with a 2012 model from a dealership. We intend to keep it forever, though. I would not give $400 + per month just for a car, and I can’t understand why anyone would want to!
    Lauren recently posted..How to Get Around These Common Writer RoadblocksMy Profile

  18. Hey Holly, I read that post and I’m not quite sure I remember anything about buying a new car, and I also remember the duct tape fix looking froogalicious! Nonetheless, I would never buy a car with that big of a payment, and I agree, car payments suck!
    Josh R @ CNAFinance.com recently posted..Are Secured Credit Cards Not Doing It AnymoreMy Profile

  19. Car payments totally suck! Some people are just addicted to living beyond their means and don’t want to change. I had a car payment once and it drove me crazy. As long as my car moves I’m happy. Another big savings from not having a car payment is lower insurance premiums because full coverage is no longer required. I’ve got a friend who makes around $20K a year, driving a $15K car and his insurance costs more than his car payment, Yikes!
    John C @ Action Economics recently posted..Claim Exempt on Federal Income TaxesMy Profile

  20. I think that cars are the worst investment you can make. They literally drop in value by half the second you own it. And $450 a month just seems crazy to me for a car payment. I understand the sometimes people have to finance cars, but you can get one for less than $200 a month. Even if you do finance, it doesn’t mean you should go overboard in the amount of car you have.
    Shannon @ Financially Blonde recently posted..Talk to Your Kids About MoneyMy Profile

  21. I think is someone gets joy out of a car then go buy one! But for me? No way in hell I’m taking out a car payment again. I had a car payment (around $350 per month) when I first bought my car in 2008. It was the worst freaking payment I ever had. I mean $350 a month for a freaking car!! All I care is that my car reliably gets me from point A to point B. And since my car still has low miles after driving it for 6 years and hasn’t had any problems I think I can get another 6-10 years out of her.

    I spend my money how I want and others should too. If that means taking out a car loan more power to you but I’ll definitely pass.
    Alexa recently posted..Grants for Single Mothers Going Back to CollegeMy Profile

    • The car payment on my only “new” car was something like $500. That is so crazy! I can’t believe I did that to myself voluntarily!

  22. I agree! Car payments do suck! Unfortunately sometimes they are a necessary evil. OK, maybe not really evil, and I’ve never had one over $400 a month but if I did have that extra $450 a month I’d get completely out of debt and start investing the rest. Ideally I’d like to get the the point my investments fund my lifestyle.
    Adam recently posted..My Disney Credit Card, I’m getting a bunch of points this month!My Profile

  23. I agree with you that car payments suck but sometimes it needs to be done. For example I recently helped a friend buy a car. She had no money to pay cash and that is her mistake for not saving but what can she do now if she needs a car to get to work? Good thing was that I was able to convince her to get a small car rather than another SUV as she wanted and was used to. The smaller car is something she could easily afford and served the same purpose. I hope that she learns from her past mistakes.
    Raquel@Practical Cents recently posted..Around the House: My Favorite ThingsMy Profile

    • That’s really nice that you were there to guide her. Otherwise she would’ve ended up with a giant SUV that gets terrible gas mileage.

  24. I can understand wanting to drive a nicer car if you drive every day. I have a long commute and yes it felt nice when I bought a newer used car. I paid cash so no car payment, but even if there was a small car payment, it had to be done because the old car was no longer reliable. But I really don’t see the sense in a $450 car payment. After the newness of the car wears out, it really is just something that gets you from point A to point B. I’m not sure I’d be happier with a fancier car…unless I liked my ego stroked and others to see me in a luxury car.
    Andrew@LivingRichCheaply recently posted..Why Do You Live Where You Live?My Profile

    • I had a new car once and it only stressed me out. Birds shit on it. People hit it with shopping carts. I don’t need that kind of stress in my life.

  25. Maverick says:

    I agree with you. Only my first new car was financed. That was 1985…I still have it as a collector car. When it was paid off, I kept putting the same monthly amount into savings for the next car. Been buying new cars with cash ever since. Its the best way to negotiate…cash. Since I also do my own repairs, when I leave the dealership after the purchase, I pat the car on the dash and say, “don’t look back, you won’t see this place again”.

  26. I absolutely agree with you! In my early 20′s my biggest mistake was leasing a vehicle for 4 years, then at the end of that lease to avoid a $1200 over mileage fee, I bought the vehicle and paid on it for another 5 years! 9 years of car payments….my $22k car cost me a hell of a lot more than $22k. So dumb! Live and learn, now we’ll only pay cash. Freeing up that $350/mo did wonderful things for our debt repayment schedule and savings accounts too.
    Angella recently posted..Refocusing Negative EnergyMy Profile

  27. I have a new car payment and I agree that car payments suck! It’s actually my first car payment ever and will definitely be my last.

    However, I will say that it actually feels worth it. It’s in the 200s so it’s affordable and my car actually makes me really happy. I feel safe knowing it’s dependable and since I drive a lot I’m happy to have something that I actually wanted for the first time in my life. That’s worth the payment ever month rather than another couple of years driving shitty cars with constant problems that I never wanted in the first place.
    Fig @ Figuring Money Out recently posted..Using ReadyForZero to Pay Off Car Loans FasterMy Profile

  28. Both my cars are paid for and it’s super nice. That being said, they are both old and will probably both die at the same time. :)
    Cat Alford (@BudgetBlonde) recently posted..Saving Money Isn’t for the Sleep DeprivedMy Profile

  29. One of my boyfriends old co-workers got a new car every two years or less. Insane!! He would just keep trading them in, one after the other. I do think some people get bored quickly, even though it’s “just a car.” My ex was like that – he had 7 cars in the span of six years. Most were junk, but I think he bought crappy cars just to have an excuse to get a newer one that much quicker. All that money wasted…
    E.M. recently posted..Can You Stand the Heat?My Profile

  30. This topic has generated sooo much feedback! I agree that car payments suck! I drive a 14 year old car that I bought used from my grandmother (and have had for the last 6 years). I live in an area where I was able to commute via transit for 5.5 of the last 6 years. Now that I drive to work, my car is on borrowed time, however, I’ve been making a “car payment” to myself since college, which afforded me to 1. buy my present car, 2. split the cost of my wedding with my husband and 3. put a decent chuck down on our house. Granted since I used that money for other “investments,” I will probably have to take a loan on the next car….but if I do, I plan to drive that car forever, so I can do the same thing! Not having a car payment rules!!!

    • It really is such a freeing feeling. We used to have two car payments and I think they totaled something like $700 per month. Never again!

  31. I’d only ever take out a car loan for arbitrage in a safe place like a bank account. Actually, that’s exactly why i did with my first car after college. In retrospect, I could have bought a cheaper car than a brand new Civic, but it will last me many years to come!
    Lance Cothern recently posted..What We’ve Accomplished Since Paying Off $80,000 Of Student LoansMy Profile

  32. LeRainDrop says:

    I bought my first car for cash and drove it 11 years. I assumed I would pay cash for my next car, too, but at the last minute, decided to put a little over half down and finance the rest at 2% so that I could invest the rest of the cash. BUT I really hated having to make the monthly payments. I already had finished paying off my student loans a few months before getting this car, and emotionally I was tired of having to deal with monthly loan payments (other than my mortgage). I found myself paying extra on the loan every month for like 8 or 9 months till I decided to hell with it and paid it off :-)

  33. I bought my car a couple of years ago, financed it, and paid it off as quickly as possible. It was important for me to do that because, like you, I think car payments suck. I’ll never understand why people will go to personal finance blogs and complain about the bloggers opinion about money, regardless of whether they offer one. It’s madness.
    Daisy @ Prairie Eco Thrifter recently posted..Benefit from My Financial MistakesMy Profile

  34. I really wouldn’t say that I agree that cars are supposed to be for fun. That’s an EXPENSIVE hobby if that’s for fun.. plus many people need them for businesses or to get to/from work.. depending on where you live. Anyway, just seems silly.
    SuburbanFinance recently posted..How Spring Cleaning Earned Us $432My Profile

  35. My new car will be paid off next summer – I bought it because my old one was failing mechanically and trust me, breaking down in the middle of the motorway is no fun! My payments are affordably low but I look forward to when it’s all paid off when I can invest the money instead. The car should (fingers crossed) last me many years.

  36. I absolutely HATE my car payment. HATE! It takes up such a huge chunk of my paycheck, and all I can think about are all the ways I could have used that money otherwise. *sigh*
    Lisa E. @ Lisa vs. the Loans recently posted..Links Lisa Likes – Tea Time and Memorial DayMy Profile

  37. i’d rather buyin it on cash , thats easy to pay , no more paycheck every month , and ya thats it

  38. Katelynn says:

    I just have to say how incredible your posts are! My husband and I are newlyweds and we have been finding as many resources as we can to 1) get out of debt and 2) save for the future. Your posts are so encouraging, and hilarious, that it makes this process fun! ;) Thanks for all your insight and words of wisdom… we are on our way to being the most frugal friends in our bunch!

  39. I work in the auto financing industry and boy oh boy every day I see one bad decision after another. It’s sad, really. It’s also crazy how tempting it can be to see all these nice cars and wonder if I should finally ditch my 17-year old car for a newer one. And that’s why it’s good to be married to my wife :)
    Ben @ The Wealth Gospel recently posted..Loyalty and MoneyMy Profile

  40. I don’t think car payments suck. I have one, but it is at a rate that very few people can get. I could pay for the car in cash, but I wanted to keep my cash liquid. I don’t fault anyone for not liking car payments, but I have no issue with them. Though cars are a depreciating asset, they are still very much an asset. Most people can’t get to work without one and couldn’t do much without a car. I consider a car an investment as it enables me to produce income.
    Grayson @ Debt Roundup recently posted..How to Make Extra Money this SummerMy Profile

  41. Save! One day when I’m a millionaire I’ll buy a brand new car, but for now? I would rather that extra $6k in the pocket at the end of the year.
    Christine Berry – Wealth Way Online recently posted..May Income ReportMy Profile

  42. Oh internet trolls. It’s almost like they forgot where the backspace button is.

    Totally agree with your point… car payments STINK TO HIGH HEAVEN. I’ve learned my lesson. This is my first and last car payment.
    Taylor recently posted..We Paid Off My Student Loan! – and then got a $1,000 bill.My Profile

  43. This is a topic that is close to my heart…

    Many thanks! Exactly where are your contact details though?
    Johnette recently posted..JohnetteMy Profile

  44. I finally woke up last year around this time when it comes to car loans. I sold my shiny car and bought myself a $5k Cadillac that rides smoother than the new car. Now I have no car loan, my insurance is cheaper because full coverage isn’t required, and in AZ my annual registration fee (which is crazy high out here) is slashed in half. It was one of the best financial decisions I have ever made. I’m with you… I Fugging hate car payments!!
    Cedric@FuggingDebt recently posted..14 Quick Ways to Increase Cash Flow to Pay Off Debt FasterMy Profile

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