cars ground

Our cars are paid for.

They are safe and reliable.

They meet the needs of our family.

For those reasons we are not in the market to buy a new or even new to us car. I plan to run our cars into the ground with the goal of paying cash for our next cars. Brian is not quite as committed to this plan. He would like to upgrade before they fall apart, and would consider a small car loan if we had to. I’m sure when the time comes it will be a happy middle ground.

We currently drive a 2005 Toyota Corolla and a 2009 Toyota Matrix. Both cars have well over 120,000 miles and are still going strong. We could certainly get a nice, used car loan for a few hundred dollars a month, but why?

We haven’t had a car loan in several years and that is a great feeling.

Do our older cars need expensive repairs?

Yes, sometimes, but can you guarantee me that a newer car won’t need repairs too?

No, not even with a warranty.

In our budget we have many different line items (categories) that our money is divided into.

One of them is called, “car repairs,” and every month we allocate a $100 towards this line item, which totals to $1,200 a year.

Any time we have a car expense it will be deducted from this.  This includes new wiper blades, oil changes, washer fluid, new brakes, etc. Some months we may not have any expenses for car repairs and some months we have a lot. There are times that the expenses are more than what is in that line item. If that happens we allocate more of our income from that month towards car repairs. This just means that there is less extra money to go towards our student loan debt.

Regardless of how much we spend on car repairs in a given year, we have yet to spend more than $3,600 in a year.

That is the minimum amount of what a newer car loan would probably cost us. That amount doesn’t even factor in

That is the minimum amount of what a newer car loan would probably cost us. That amount doesn’t even factor in upkeep of that newer car. We know that even newer cars need oil changes and minor repairs.

Given this math it doesn’t make any sense for us to get a car loan when we have two perfectly nice cars that continue to function well and require little investment.

You may be asking yourself how we intend to pay cash for our next cars.

Well here is the answer.

You create a “sinking” fund.

This means you set a goal for how much you are going to spend on your next car and you start saving in the “new car fund” before you buy it.

Essentially you are being your own bank loan.

If you want a $10,000 car and you want it in 2 years then you need to save $417/month. You would take that $417 and put it in a savings account every single month until you had all of it.  You decide how much you want to spend and how long you can save for and figure out the math. It‘s like you are making a car payment to yourself before you buy the car.

Then after 2 years you will have enough cash to buy the car. Plus, if you have cash you may be surprised at what kind of deals you can get from the dealership or seller.

If for some reason your car needs to replaced before you have saved the entire amount, you take what you have saved and buy a car in that price range. Then continue on saving and once you have enough saved you can sell your current car and use the cash you have saved to upgrade. You will then be set up to always pay cash for a car.

Good-bye car loans.

We are not currently saving up for our next car because our sole focus is paying off student loan debt. We will save for the new car when that student loan is paid off. Our hope is that we will have enough time to save up cash for our newer car before one of them dies on us or becomes too cost prohibitive to maintain.

Although…..

we were once a one-car family……..so……

better not let Brian hear me talking this way. I think my cheapness frugality may drive him crazy sometimes.

If and when you either start to get the itch for a new(er) car or get frustrated about the cost of repairs on your older car be sure to look at the situation with an open mind.

If you don’t have cash to pay for a new(er) car, consider what your monthly payment would be.

Can you maintain your current car for that amount or less a year?

Could you make do with your current car and begin saving in a “sinking fund” to pay cash for a newer car in a couple of years?

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