OMG! I recently read that according to the credit-tracking company Experian, the average vehicle loan is now 65 months. Some people are even opting for an EIGHT year loan. Can I get an OMG!? That is absurd. Are these people planning on living in these vehicles?
Why do we think that car loans are acceptable, good debt? Do cars increase in value like a home? Does a car define who you are? When I talk to individuals regarding the pending purchase of a car (i.e. auto loan), here are a few things I hear…
But I need to get my monthly payment down to something I can afford!
I want to say this as nicely as possible…..This is STUPID! If you need this long of a term to get the kind of monthly payment you can afford, they you are better off walking, you don’t need a car! Be honest with yourself, if you can’t afford a payment, then don’t get one. Save up and buy only what you can afford.
It’s an investment.
A vehicle is a bad investment! Then add on compound interest on a long term loan and this is a no win situation. Some would argue that a vehicle is not an investment at all, it’s an expense.
A vehicle loses value the moment you drive it off the lot. Just think about it, do you really want to drive your retirement down the road?
I deserve a nice car.
NO! What you deserve is financial freedom and getting a ridiculous loan on something that depreciates faster than your mother-in-law annoys you isn’t going to get you there. You do deserve a nice car, but you deserve it debt free. The feeling you get driving a debt free car totally out weights the feeling of that payment to your checkbook. As Dave Ramsey would so famously say “Live like no one else now so that later, you can live like no one else”.