Cars and Debt: They don’t necessarily go hand in hand

When it comes to buying a car, most of us take it for granted that debt has to accompany the purchase. To buy a car without taking on debt, you’ve got to (of course) buy with cash. That seems like a laughable proposition for most people. After all, who has tens of thousands of dollars lying around? You may not have huge sums of cash in the bank, but that doesn’t mean you can’t make it happen. Here are a few ways to save up for a car. Even if you don’t manage to save the price of the car, a large down payment will cut down on the debt you have to carry after you make the purchase.

Let’s say you finance a $25,000 car with zero down payment, at 3.11% interest. I don’t know many dealerships that will let you off the lot with a brand new car with no down payment, but this is just an example. If you plan to pay the car off over 5 years (60 months), you’ll be paying $450 a month.

Now, let’s say you are planning to buy a car at some future time. Why not set a date and start for purchase – say, 18 months from now – and start paying you that $450 a month, just to see how it feels.

Make sure you never miss a payment. Pay directly into a savings account the money that would normally go to pay a loan. See how the payments “Feel”. Are you able to manage these payments well without thinking you’re going to go broke? Are you managing your other bills well enough? Are you able to make additional savings on top of the payment? If you are not able to comfortably handle such a monthly payment burden, your future car purchase is likely to be a poor choice.


Perhaps consider a used car closer to the state of your current vehicle. If you are able to get by on your current car well enough, then something slightly newer and more reliable will also serve you well. You may even trade in your car as a kind of down payment, or sell it privately and use that money to provide down payment. Check out this source to understand how to finance used cars. You may find some things that interest you.

In the end, cars and debt don’t necessarily have to go together. If you are willing to buy used car, save up for a big down payment percentage, and look for a deal, you won’t be saddled with big debt. Even if you want something expensive and new, preparing years in advance by making payments to yourself will help you prepare for the monthly expenses, as well as cutting down on the time you have to pay because now you can manage a bigger down payment.

Article Submitted By Community Writer

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