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How To Never Make Another Car Payment |
by:
Tony Puckerin |
Again
Car prices today compete with small houses and well-equipped
mobile homes. As these price increases become more accepted by
consumers, so too are the longer terms that are necessary to fit
them into cost of living budgets. At one point, the magic payment
amount for the retail automobile market was $200 per month. But
that payment would only satisfy a loan of approximately $8000-
10000 depending on interest rates.
The average car payment today is closer to $400 per month and
that's with financial institutions stretching the terms to 72-84
and 120 months. Something has gone terribly wrong in the psyche of
consumers to even imagine that an automobile will not become
obsolete before it is all paid up, 6, 7 or 10 years down the road.
All they really need to do is take a look at a vehicle sold in
1995, 1997 or 1999, to get a live preview of what their new car
will look like and potentially what it will be worth.
Interestingly, research indicates that most Americans get bored
with a car after driving it for 24-36 months. Why then
would the typical financing term be 72-120 months?
At the point of purchase, most consumers tend to forget that car
payments never include the cost of insurance, required maintenance
and gas. When these items are added to a car payment, it can
easily exceed what some people are paying in mortgages.
It's analogous to the Middle Eastern people like Iranians whose
culture practices beating themselves on the back with chains and
whips. Every month, millions of Americans face the self-inflicted
pain of making another car payment. Like the Iranians, they
believe that if they can do it, it must be good and it will
somehow make them better people in the hereafter.
A self-made millionaire, Dr. Cooper, an advocate for reversing
unnecessary consumer debt has come up with a simple plan to change
how we think of automobile ownership. His plan uses the same
philosophy that our grand fathers grew up with, i.e. never buy
anything that you cannot afford to pay for out of your own pocket.
Unfortunately, if we lived by those rules we would need traffic
lights and zebra crossings on our major highways because they
would be packed with pedestrians.
Well let's share Dr. Cooper's plan. He calls it the "Vehicle
Saving Fund". This is a basic commercial bank savings
account that can be started at any local bank. To make it more
meaningful to you, lets call it the "Freedom From Car
Payment Fund." Anyone can start such a fund; it does not
matter if they are currently financing a vehicle.
The idea is that if you intend to be a productive member of
society and enjoy the benefits of your labor you will need to have
personal transportation. This is not optional for most people who
do not live in a big city where public transportation is
available. The fund should be considered absolutely necessary,
much like the rent or mortgage, it's a living expense.
Here is how it works; if you are currently driving a financed
vehicle, resolve to pay it off in its normal term. It's hard to
keep making payment on a vehicle you do not like but that's where
the discipline becomes important. Also, resolve to put aside a
small amount every month to your "Freedom From Car
Payment" account. Initially, it is totally understandable
that it may be a little difficult but the amount is not important,
it's the habit and the psychology of doing it that makes all the
difference. You can start with as little as $5-$10-$25 just be
committed to doing it every month until it becomes a habit.
You will also have to make a decision to continue driving the
vehicle you are currently paying, this plan does not work if you
decide that you need a new vehicle before paying off the one you
are driving. The closer you are to your end of term, the better
position you will be in to get what you want. But there is no
rush, when you pay it off you should then begin to put the amount
of your previous payment into your vehicle fund. Now with the
equity in your current vehicle and your savings you can begin
shopping.
Considering the prices of automobiles today, there is a high
probability that because of your vehicle depreciation and the
small savings, you might not have enough money to buy a new
vehicle. If you do not have enough to purchase what you want,
there are always other options; the first is to buy what you can
afford. The alternative (worst-case scenario) is facing the dealer
with no savings and having negative equity in the vehicle you are
currently driving.
Strange concept, I know, but when its all said and done,
transportation is transportation, it gets you from point A to
point B. The only difference is what you are willing to pay to get
there. For many, because of the values they hold "whatever
it takes" is an appropriate answer but the mind set has to
now change to discipline and the desire to stop making lifetime
payments.
If you don't have a car right now and are enjoying the bliss of
not having a financial obligation to an automobile, you can begin
your savings immediately so that when the time comes you will have
a sizable chunk to begin your search for your new car. You are in
a very good position if you are not in the market presently
looking for a vehicle.
You have the time to save and plan for your next automobile. Begin
the "Freedom From Car Payments Fund" today and in a
couple of years you will really be much better off. Contrary to
what dealers try to make you believe, car ownership does require
long term planning in order to break the cycle of swapping
payments every 3-4 years. It is a long term serious investment.
It's that simple. Easy, no but simple, and it can be done. It
requires discipline and patience two characteristics that are not
easily harnessed in by the now generation. The obvious benefit is
no car payment but you will also save on insurance and have much
more disposable income for other necessities. With determination,
a little vision and planning anyone can drive exactly what they
want; without the burden of a monthly payment. Could that be you?
About the author:
Tony Puckerin is an Automobile Broker in Southern Florida who represents clients
at local automobile dealerships. His service has recently expanded to Internet
and cover the United States and a few select international clients. For more information
go to
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