No Car Payments
Hey Y'all! I'm writing this blog to defy the odds. I'm here to explain how we aren't crazy, but that we also don't have car payments. The reason I'm sharing this and supplying relevancy is that we are currently saving up to pay CASH for a vehicle. By now, most of you know that Megan and I follow the Dave Ramsey "Baby Step" plan.
Looking at those "Baby Steps," we are in steps 4/5/6 all at the same time. Steps 1, 2, and 3 are done one at a time, but 4-6 are done together. This means we are (step 4) saving 15% of our income towards retirement, (step 5) saving towards our kids college (skip if you don't have kids), and (step 6) paying our house off earlier than our 15-year mortgage would require.
In all of the 'Baby Steps,' Ramsey preaches paying cash for items and not taking on debt. This means even large items like vehicles get paid for in cash, not on payments.
With us just having Delaney, we haven't been able to contribute to her 529 plan yet, but we have her account setup and will actually start in October. We also just moved into our house in June, so we haven't accelerated any payments yet other than the base amount. We're taking care of a few other items with the remaining cash in our budget before contributing extra dollars to the mortgage each month.
When looking at saving up for this next vehicle, we could go out and buy the car today with our 'emergency fund,' but we haven't qualified this an emergency. It is something we can plan for and be patient, but intense and motivated to reach our goal. We are looking forward to replacing her Ford Escape with a more reliable SUV, that we will hopefully have for a long time. We're looking to replace Megan's car because it is somewhat of a 'lemon.' It gives us pretty constant issues with necessary repairs to keep it safe and running. This will be the first time either of us pay cash for a car. We had our current vehicles on payments and have paid them off. Since paying them off, we've been repurposing that car payment money towards other parts of our plan.
I remember when my 5-year loan on my Pontiac G6 (click this link) was getting set to be fully paid off and I began thinking about what car I would purchase through a car loan next. As this was happening, I also thought, 'what if I just kept this car, and didn't have a car payment?' Obviously, I've kept the car and haven't had a payment in almost five years. I bought the G6 in December 2009 with about 32,000 miles on it. This means I'm coming up on the 10 year anniversary of being in the same vehicle! I didn't pay the G6 off early, but payments ended in December 2014. I was paying $250 per month, which is well below the average car payment today of about $550/vehicle/month. Most lenders are now offering six or seven year loans to take further advantage of the consumer. By continuing to drive the G6 and not having payments, I've put that $250 per month to use in what I've deemed to be better categories (retirement, vacations, etc). This $250 per month over five years has totaled $15,000, or essentially another whole vehicle based on the loan that I had previously.
I just hit 128,000 miles earlier this week, and plan to continue driving the G6 for another year or so. After we save to pay cash for Megan's vehicle upgrade, we'll do the same for mine along with selling our vehicles to replace mine. We plan to spend between $10-15,000 per car and will need some time to save up to do so. This means we won't be looking at a new vehicle, which I wouldn't recommend either since it is one of your bigger assets, but goes down in value.
The biggest parts of this entire decision and process are:
Looking at those "Baby Steps," we are in steps 4/5/6 all at the same time. Steps 1, 2, and 3 are done one at a time, but 4-6 are done together. This means we are (step 4) saving 15% of our income towards retirement, (step 5) saving towards our kids college (skip if you don't have kids), and (step 6) paying our house off earlier than our 15-year mortgage would require.
(The 'Baby Steps' laid out per Chris Hogan's (Ramsey personality) Instagram account.)
In all of the 'Baby Steps,' Ramsey preaches paying cash for items and not taking on debt. This means even large items like vehicles get paid for in cash, not on payments.
With us just having Delaney, we haven't been able to contribute to her 529 plan yet, but we have her account setup and will actually start in October. We also just moved into our house in June, so we haven't accelerated any payments yet other than the base amount. We're taking care of a few other items with the remaining cash in our budget before contributing extra dollars to the mortgage each month.
When looking at saving up for this next vehicle, we could go out and buy the car today with our 'emergency fund,' but we haven't qualified this an emergency. It is something we can plan for and be patient, but intense and motivated to reach our goal. We are looking forward to replacing her Ford Escape with a more reliable SUV, that we will hopefully have for a long time. We're looking to replace Megan's car because it is somewhat of a 'lemon.' It gives us pretty constant issues with necessary repairs to keep it safe and running. This will be the first time either of us pay cash for a car. We had our current vehicles on payments and have paid them off. Since paying them off, we've been repurposing that car payment money towards other parts of our plan.
I remember when my 5-year loan on my Pontiac G6 (click this link) was getting set to be fully paid off and I began thinking about what car I would purchase through a car loan next. As this was happening, I also thought, 'what if I just kept this car, and didn't have a car payment?' Obviously, I've kept the car and haven't had a payment in almost five years. I bought the G6 in December 2009 with about 32,000 miles on it. This means I'm coming up on the 10 year anniversary of being in the same vehicle! I didn't pay the G6 off early, but payments ended in December 2014. I was paying $250 per month, which is well below the average car payment today of about $550/vehicle/month. Most lenders are now offering six or seven year loans to take further advantage of the consumer. By continuing to drive the G6 and not having payments, I've put that $250 per month to use in what I've deemed to be better categories (retirement, vacations, etc). This $250 per month over five years has totaled $15,000, or essentially another whole vehicle based on the loan that I had previously.
I just hit 128,000 miles earlier this week, and plan to continue driving the G6 for another year or so. After we save to pay cash for Megan's vehicle upgrade, we'll do the same for mine along with selling our vehicles to replace mine. We plan to spend between $10-15,000 per car and will need some time to save up to do so. This means we won't be looking at a new vehicle, which I wouldn't recommend either since it is one of your bigger assets, but goes down in value.
The biggest parts of this entire decision and process are:
- On the same page with your spouse and having the same goals and dreams
- Being patient in our decision making and thinking about the future
- Remaining content and practical for what our needs are. We don't need an expensive vehicle that would prevent us from reaching some of our other goals.
We all know vehicles are expensive and they decrease in value. It is hard to use your head instead of your heart when car shopping. We all want the nicest, most luxurious car. In all actuality, we only spend a fraction of our day in our vehicle, so why allow this to be one of our biggest monthly payments? And if you spend a lot of time in your vehicle, that is an even bigger reason to avoid spending a lot on your vehicle because it will depreciate even faster.
Dream with us: What if you could pay off your car and not have a payment? How would you spend that $200, $400, $600 a month differently?
We've never leased a car so I won't share much on that, but if you're wondering how that stacks up financially, how to get out of it, if you should pay it off early and keep it, if you're over on miles, etc, check out this Dave rant.
Again, I wanted to share this info as an update on one of the goals we are working on currently, but to provide a little more insight into how we are doing it. If you have any questions, let me know in the comments below or reach out through social media or text!
Getting Personal:
Delaney is getting big! She is coming up on 6 weeks old, 11 pounds and starting to hold her head up! She's also sleeping a little bit! She really loves watching the Packers with us, especially when they win! She lost the hair on top of her head, but we still think she's pretty cute even if she has a hairstyle like Hulk Hogan!
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