Car Payments Suck: What A 16 Year Old Taught Me

Last weekend, my adorable, smart, 16-year-old sister reminded me of a very valuable personal finance principle.

Truly, live within your means.

She doesn’t have a car, but she works 25-30 hours a week. Frankly, my mom, brother, and sister are sick of driving her around and she wanted a bit of independence. 

She had been saving money for a while now and finally had $1,000 saved up for a car. My boss’ step-son will be moving away and had a really dependable, reliable, and well-cared for Subaru Outback. 

Now, I know they were being kind and helpful, so they gave my sister a steal of a deal. $1,000. 

She paid for it in cash.

*Side note: one of my biggest money rules is ONLY buy something if you are getting a steal. 

Her dream car is a black Jeep Wrangler (with a price tag of $15K+), but she made a responsible financial decision- she was going to have a car that was truly within her means. 

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My brain thinks in ratios.

She probably makes $6,000 a year. So this $1,000 purchase equates to 17% of her yearly income. The average household salary in the US is around $55,000 and the average car purchase price is $28,000- or 51% of their yearly income. 

That wouldn’t be so much a problem, but it’s how this car is acquired. Trust me, not many people are paying $28K cash for cars. They finance them. 

The real problem is what that does to your cash flow. The average car payment is $471 a month. If the average income is $55,000 (before taxes) then take home pay is around $3,208. That car payment is 15% of monthly take home pay. 

With cars, too much of your money is tied up in things that go down in value- big time!

A new car is worth 37% less after 4 years.

Would you put your money into something that is guaranteed to lose 37% in 4 years? I sure as hell hope not! I prefer to put my money into things that will MAKE ME MONEY, not lose it every single time.

That’s just the start of the problems.

The deeper underlying problem is contentment.

We buy things we don’t need, with money we don’t have to impress people we don’t like. 

And we spend heavily for that impression factor. 

This video discusses the what if you tried something different analysis. 

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What if instead of working a job you don’t like, for not nearly enough money, you lowerd your lifestyle. Yes, I know you think you can afford to buy things because you can afford the payment, but I disagree.

A life of working to make payments will catch up to you. It will kill your cash flow, force you to work jobs you don’t like, and ruin your chances of leaving a financial legacy.

What if you decided to live differently?

What if you stopped living your life for someone else?

What if you said “f*ck off” to everyone else’s expectations, judgements, and influence of what “image you present” by the car you drive?

This one seemingly small financial decision of should I save and pay cash for a reasonable car well within my means, or finance one… adds up to making a DRASTIC impact on your finances.

Car payments are the difference between having the ability to travel, retire a millionaire, stay home with your kids, pay for school, quit the job you hate, or sleep better at night and being a slave to payments.

It’s the difference between having “normal” results and “abnormal” results.

I don’t know about you, but I think living pay-check to pay-check and working my @ss off to make payments is no way to live.

In the words of Dave Ramsey- “Drive like no one else, so later you can drive like no one else.”

Best,

 

 

 

Ps. I know this post will piss a lot of people off, but I would like to challenge you to think differently and consider how living a life payment free would affect your life.