How to Never Have a Car Loan

By Steve Diggs
No Debt No Sweat! Financial Seminar Ministry

CBNMoney.com –Let’s talk about cars. More specifically, let’s talk about the dumb things we do in car showrooms that we end up paying for for years to come.

It’s hard to listen to any radio or TV show very long without hearing from a half dozen fast-talking, backslapping car folks. The pitch is often the same, “Stop wasting money repairing that old clunker—step up to a brand new 2003 Supper-Dupper, Hippy-Dippy-Daddy-Bopper… This or That!”

I don’t want to over-spiritualize what I have to say about car buying, however a comment from Jesus comes to mind as I write this. As He prepared his apostles to go out into the world, one of the Master’s admonitions was, “Behold, I send you as sheep in the midst of wolves; therefore be shrewd as serpents, and innocent as doves.” (Matthew 10:16 NASV)

This short comment of Jesus’ has served me well for much of my adult life. It reminds me that not everyone can be trusted. I need to keep my guard up and not believe everything I’m told. Sometimes a little skepticism is a good thing. c But, as Jesus also reminds us, we must be as “innocent as doves.” I know there is the temptation to “fight fire with fire.” But, as Christians, we need to avoid the urge to become cynical and dishonest ourselves. As a believer, my goal is to deal honestly, yet at the same time remain a good steward of my money.

That’s why I believe it makes sense to think about car buying occasionally. After all, for many of us, our car is the second biggest expense we have after housing. As I present the No Debt No Sweat! Seminar at churches around the country, I hear stories about disastrous car purchases. Today the average car loan is some 55 months long and costs almost $380 per month. That’s a lot of money.

In my book, No Debt No Sweat!, I write at length on cars: how to negotiate your best deal, how leases work, new vs. used, etc. While I don’t have space here to go into as much detail, let me make a few observations.

To begin with, we have to face the fact: New cars DO NOT make good financial sense—period. Am I against owning a new car? No. But before buying one, I believe there are two things one should do:

Look yourself in the mirror and admit the truth, “This is a luxury—not a necessity. I want it because I want it—not because I need it.” I don’t care if it’s a Cadillac or a Kia—it’s a luxury. Why? Because anything that can drop in value by up to 40% in the first couple of years is not an investment! Is it wrong to have a luxury? Not necessarily. But, that leads us to point #2…
The only right way to buy a luxury item is if you can afford it. What do I mean by being able to afford it? I mean you are able to walk into the dealership, pick out the car you want, write a check for it, and drive it home never missing the money. If you can’t do that, you can’t afford it.

Believe it or not, 22% of cars and trucks are sold for cash. Who are these people who can buy a vehicle and pay cash for it? For the most part they’re people just like you and me who have made up their minds to get control of their lives. Instead of living like the masses, these are people who got fed up with business as usual. They decided that eating out all the time and buying designer clothes they couldn’t afford was crazy. They realized that getting ahead was something that only happens when you get really tired of being broke all the time. There was that moment in time when they finally got tired of living on the edge—so they changed things.

The good news is—you can do it, too. Don’t believe the lie that only rich people buy cars with cash. It ain’t true. Lots of people on their way to becoming financially free are buying vehicles and paying cash for them. Besides, how do you think those rich folks got rich? They didn’t do it by making interest payments to someone else!

How To Never Have Another Car Loan

There’s a way to never have another car payment—EVER! (And, no, I’m not talking about taking the bus!) This is a little idea that I ran across has reduced financial pain for a lot of people. Here’s how it works:

Step 1) Forget your ego.Believe me, this is the toughest part of all. Egos are expensive to maintain. It’s especially hard for a person to forget their ego when it comes to the car he or she drives. For Americans, cars are an extension of our personalities. We show the world who we are by the cars we drive. Even Christians fall into this trap. But if you ever want to pay cash for a car the first thing you must agree to is never drive a car you can’t afford to buy with cash. Curiously, by making this determination, many people have gradually stepped up to some of the nicest cars on the market.

Step 2) Save $3,000-4,000 quickly and buy a safe, affordable car. Get focused on saving that $3,000-$4,000. Do whatever it takes: Brown bag your lunches, skip a vacation, work overtime, get a second job. See how quickly you can make this happen. This is enough money in many areas to buy a decent, safe car. (Note: I didn’t say fancy or prestigious.)

Step 3) Now, start making monthly car payments to yourself. With your “new” car in the driveway, it’s time to start making car payments. But instead of making them to a bank, pay yourself instead. Now, here’s where you have to be tough and intellectually honest with yourself—don’t ever cheat. Just as surely as you would send monthly payments to the bank, set aside a monthly payment to yourself. Since the average car payment in America is well over $300 per month, I would encourage you to set aside something in that range. Do this for a couple of years. By that time you will have $6,000 to $9,000 in your “Paid-For Wheels” account. Sell your old car. Suppose you get $1,000 to $2,000 for it. Now, you have around $7,000 to $10,000 for a much nicer car.

Step 4) Repeat the Process.Now all you have to do is repeat this little strategy until you are driving the car of your dreams—still never making a payment to the bank!

Why am I talking about cars—and not something more spiritual? Because for many of us it’s our cars and other stuff that absorb far too much of our time, money, and worry. By refocusing and redefining our needs, we will use our money more wisely and travel more lightly before our Lord.