Financial Freedom Quick Tip #10: Ditch the car payments

Today’s tip is a bit of my own, and a bit from my friend Nate.

Many people think car payments are a way of life, but that simply is not true.

There’s a different strategy that works. Save up, pay cash for a cheap car, and pay yourself the car payment. If you want a better car, save a little longer!

I can personally attest that this is possible, and absolutely worth it. I drove an old messed up car for about three years, and saved my money during that time. Eventually I was able to afford to buy a better car. Cash.

I am now driving a very nice car, that I bought 2nd hand. It’s reliable, safe, powerful and luxurious. I have no car payments, so I’m already saving up for my next car. I will never buy a car on credit again. No car payments ever again. Never.

Another thing about cars: people often just don’t realize how freaken expensive they really are! If you want to find out what your car is really costing your, you can read Liberta’s article about the cost of car ownership, and use the car costs calculator to see for yourself.

This tip is part of the Financial Freedom Quick Tips series. If you want to receive a notice every time a new quick tip is published, you can subscribe to Liberta.

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  1. Mandy

    YES! We bought our last car for cash (1st one ever). It was awesome to flash those $100 bills…it would have been hard for the seller to say no while looking at that.

    We were able to negotiate the car from 13k to 11k just because we had cash in hand.

  2. jamiebatts

    yes, we have really enjoyed not having a car payment also. we paid cash for out toyota and lucky for us michael works for toyota so we get parts and labor discounts.
    i saw on the news where they were talking about gas being so expensive and people were trading in their gas hogs for smaller cars that were better on gas. well. the guy was saying that you really are not saving money when you do this because if your car is paid for or almost paid for you are only paying for gas but if you buy a new car to save on gas, you are paying for the new car and the gas. i thought that made a lot of since.

  3. Financial Freedom Quick Tips

    [...] Financial Freedom Quick Tip #10: Ditch the car payments [...]

  4. Robin

    I heard that story too Jamie and we have also talked about the whole electric car thing. Everyone is saying go electric, but when you look at the cost of the car ($100,000+), it is rediculous! I took the price of gas now and figured that it would take me 40 years of buying gas to equal that amount of money. If we can’t afford to pay $4 or more for gas, how do they expect us to pay $100,000+ for an electric car that I would have to charge to be able to get home from work?

    Just my 2 cents. I hate having a car payment… ;)

  5. Francois Viljoen

    I agree. Rather buy a cheap, old, small car that is light on fuel.

    It may not match up to the fuel efficiency of the newest electric cars, and it may not look cool, but it will be WAY cheaper, and you’re still doing your bit for the environment.

  6. Robin

    Yeah I agree about the environment part, but if I had $100,000 we wouldn’t be talking about becoming debt free. ;) hehe

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