Growing up I always assumed everyone has and will always have a car payment.
Every “budget” (more on that later) I ever had included car payment expenses. I don’t know about you, but I like new cars. I think back now to some of those decisions now and shake my head. Like how a brand-new college graduate making $35K per year could justify a new Chevrolet Silverado fully loaded and finance $10K more than his annual salary? Not to be beaten there this same guy liked some of the “new features” that the next years model offered and traded up for those options because rolling the negative equity into the new loan was just too easy.
I wish I could tell you that the story got better with time, but it did not.
Remember I thought everyone has and will always have a car payment so what is the big deal. Fast forward fifteen years and that same guy is still chasing new cars, rolling negative equity, and having a car payment that has now climbed to what some people pay in rent or a mortgage. That was the moment when I said “ENOUGH”! So, if you want to get out what do you do? First you need to recognize that the answer to this is almost always unique to each situation but here are some general items that typically apply.
- It probably has to go – the new car that is. By this I do not mean go to Carmax and get their “guaranteed offer”. That’s a guaranteed rip off. What you’re looking for is to sell your ride at private party value. Check out KBB.com and see the difference in your cars value from a trade versus selling it yourself. It will astonish you. Oh, and yes you can sell your $40K ride yourself. There are steps to take and it may take longer but having personally experienced this directly it is possible.
- You may have negative equity and, in that situation, a personal loan for the difference would be acceptable. I never recommend borrowing money but, in this case, we’re trading a larger debt for a smaller one and on the path to financial hope these are actions we must consider.
- Determine what you can cash flow? HINT – start small. Trying to save up $20K can take too long and leave you frustrated. You may have to start with a 2-5K used car and you know what that is ok. You’re getting started and what we’re trying to do is start letting your income work for you and if it’s not going out every month on a car note you have options and that is when the fun starts!
- The hardest part in all of this is swallowing your pride. Don’t try to keep up with the Jones’s because the Jones’s are broke. Here is a word that no one likes – contentment (gasp I know he didn’t go there!). The bible speaks to this directly and it is something I personally struggle with. It can be hard, especially for us men, to take what can be perceived as a step back. Driving an older vehicle does not take points against your man card! On the other hand, it shows what you value (family, future, legacy). Dare to be extraordinary!
Here is a scary number – did you know the average car payment is $554?
Now I do not know about you but $554 goes a long way in our budget. Imagine how you could use that money in other areas of your budget each month? Maybe you could start saving for retirement? Perhaps you could give to that charity you always wanted to support or fund a mission trip? Deciding to break free from the bondage of car payments feels amazing. When you look in the driveway and see YOUR vehicles (not some lien holders) it is a wonderful feeling.
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