Why Financing a Car Can Be a Nightmare (My Story)
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Before sharing my story on why and how I became car debt-free, I want to share these interesting numbers with you…
- The average monthly car payment in the USA is around $550 for new vehicles, $400 for used vehicles, and $450 for leased vehicles.
- If you invest $550 a month in a reliable fund with an average of 12% return, you will have around $126,000 in 10 years, and ONE MILLION in 25 years!
- The average value of a new vehicle drops around 20% in the first year of ownership, and will drop up to 60% of its value within the first five years!
Throughout my life, I’ve always loved the Land Rover Discovery model. When I was a young college boy I did not understand much about personal finance and debt.
I made the unwise decision to go into debt with a car loan for a second-hand Land Rover (LR3 model). Soon that vehicle became my worst nightmare!
This was the first time I had received a car loan and taken on a large amount of debt.
Previously, I drove around an old Ford SUV my mom had given me, but I sold it to buy my dream Land Rover.
Things seemed amazing at the very beginning after getting the vehicle. I was living the dream, driving around off-road with buddies and living it up… but that didn’t last long.
My vehicle started having many small issues but they were very costly to fix. Being a Land Rover car, repairs were expensive and sometimes needed a specialist.
Another big cost for a young college student was the gas money. The vehicle had terrible gas mileage.
On top of all that, my tire blew out when I went off-roading with some friends. The cost to replace all tires (because I wanted the best ones) cost me almost a thousand dollars.
Yikes!
I had no savings left over each month because of that ‘fun’ car. My wife who was my girlfriend back then helped pay for the new tires.
I am grateful for her help but also feel bad that I was not in a financial position to take care of my expenses. It was time to change.
I woke up and realized it was time to let it go.
Sometimes the process of selling a car takes a long time. I had little patience to wait because I wanted to be car debt-free and not have so many car expenses.
Many people show up to check out the car which gave me hope but then ended up not buying it.
Two options remained; I could either sell for a lower price or wait it out.
In the end, I finally sold it after a couple more months at a decent price. I used the money to pay off my car loan completely.
I then purchased a second-hand Toyota Corolla from my brother-in-law at a really good price.
My brother-in-law has his own car shop and Toyota is his number one favorite brand. He would tell me how Toyota is an amazing brand with amazing reliability.
I could basically drive that new car forever!
Life finally calmed down a bit after I sold my Land Rover. I was very happy with my Toyota Corolla. It had no issues at all!
Even if there were repairs (which there weren’t any), the repairs would have been much cheaper.
The gas mileage was also much better than the gas guzzler I previously had. Best of all, I was car debt-free and felt fantastic.
“Drive like no one else, and then drive like no one else.”
Dave Ramsey
In other words, be willing to sacrifice what you want now for what you want most.
Even now Land Rover is still my dream car but I will not get it until we hit our financial goals (FIRE!!).
We are still young and we should use extra money to invest, invest, and invest.
“Time is your friend, impulse is your enemy. Take advantage of compound interest…”
Warren Buffett
Compound interest is the most wonderful thing in the world. Start investing early and start now, you will see how miraculous it is and how it grows like crazy over time!
My motivation is knowing that one day I will buy a brand new Land Rover with all cash.
I believe it will happen and I will work hard to make that dream come true, including investing to make that happen!
I hope my personal story about car debt can aid you in making better decisions to help you achieve financial freedom sooner.
Others may think you’re crazy for not getting a car loan or driving an older vehicle, but it will be worth it in the end! 🙂
Instead of financing a car, you can save up cash to buy a used reliable car. You can also focus on saving up the cash by doing different side hustles. We personally love Neighbor.
If you have extra unused space, such as an area for a parked car, then you should check out NEIGHBOR. They allow you to make money by renting out space you are not using!
Drop a comment or question below! We’d love to hear about your experiences dealing with car debt and car troubles.
Related Articles:
6 Reasons to Buy a Car with Cash
The 20/4/10 Rule to Buy a Car (How to use it with Pros & Cons)
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
