I am certain most people do not think they can save $50,000. Admittedly, that is a lot of money. But it can be done.
One of the luxuries a lot of people spend money on is cars. Also, most people do not tend to hold onto the car for the actual life of the car. Hanging onto your car for as long as possible can prove to be a financial win.
The average monthly car payment for a new car is $502 and for a used car is $365. https://www.autocreditexpress.com/blog/whats-the-average-monthly-car-payment/
On a five year loan, a consumer is spending $30,120 on a new car and $21,900 for a used car. Unfortunately, the average consumer is spending more money than that because auto loans are being offered with longer terms. For new cars, consumers are opting for longer loans, even those that are 70 to 80 months!!! https://www.edmunds.com/car-loan/how-long-should-my-car-loan-be.html
This means that on an almost six year loan, the consumer is spending $35,140 over the life of a loan. This means paying top dollar prices for an almost used vehicle.
I keep my vehicles for 11 years. I pay my cars off 60 month car loans in 48 months. Since I keep my cars for 11 years that means I have 84 months where I have no car payments. However, in order for me to pay off my car in a shorter time I pay more on my car. So in this scenario, assuming I did not make a large down payment, which I generally don’t, I pay an extra $100 on my car loans.
In this scenario, I would be paying $602 monthly over 48 months. So I would spend $28,896 on my car loan versus $30,120 if I paid if off in 60 months. This is already a $1,224 savings by paying the note off early.
Since I would have 84 months before I purchase my next car, I could actually save $50,568.
Once I have saved this $50,568 I could then, in the future, purchase a car for cash. I have not done this method YET because I have had other financial priorities. However I have reaped the benefits of no car notes.
Not Having A Car Note Helped Me Get Out of Debt
My last car, a Toyota Camry, was about a $350 car note. Once I paid this note off, I used the money I WOULD have payed in a car loan and put it towards my debt. I then continued to use the savings towards other debt or expenses that came up.
Not Having A Car Note Helped Me Save Money For My Daughter’s College Education
Because I did not have a car note I was able to contribute significantly to my daughter’s 529 plan. I did not just contribute my car note but already had a pre-determined amount to contribute. This was just extra.
Not Having A Car Note Let Me Take All Cash Vacations
Because I was not paying a car note I had extra money to spend on vacations for myself. I could take some really nice vacations on LESS than my annual savings from not having a car payment of $4,200. Also, because I was already putting money aside the $350 was truly “extra.”
Not Having a Car Note Helped Me To Easily Have Money for Any Car Repairs
We all know that even on knew cars things come up. I always had money, at least $2,000, set aside just in case some kind of repair needed to be done to my used car.
Not Having a Car Note Helped Me To Help Others Financially
Sometimes I am a Secret Santa even when it’s not Christmas. I have been able to help out family members and friends in their times of needs and just because.
Not Having a Car Note Helped me to Pay Cash for All My Furniture
I never have had to pay for any furniture on a credit card. Ever. I have also never had to use the same as cash policies. Ever. Because I keep my cars for so long I always have a reasonable enough amount of money set aside for things such as furniture.
Not Having a Car Note Helped Me To Increase My Emergency Fund
Even if you do not do any of the things I mentioned above, you can simply shift the money you spent on your car to your emergency fund. If you take the $502 original car note and put it towards your emergency fund you could save $18,000 over three years.
Despite what the world tells you and what you see in “real” life and on television, you do NOT have to purchase a fancy new car and you SHOULD not under ANY circumstances get a car loan that is longer than 60 months. In fact, ANY car loan you get should be obtained with the INTENT to pay it off a YEAR earlier. If you can not do this then you do not need THAT car. I have the good fortune of having EXCELLENT credit. My most recent car has a .09% interest rate! Despite this low interest rate I am INTENT on paying my car off in 48 months and if I can do it before then I will. And my plan is to take the money I currently pay for my car loan and put it towards my retirement savings.