The following is an article by Melissa, our guest contributor.
Car loans are a way of life, right? If you have a car, you’re likely paying a monthly payment for that car, whether it be because you’re leasing the vehicle or because you’re on a five year (or longer!) loan payment plan.
But it doesn’t have to be this way.
No matter what type of vehicle you currently have, with careful planning and a willingness, at least in the beginning, to not care much about your image, you can avoid paying a car loan payment.
The key is to know how much your current car is worth. You can use an online service like Compare Its Value to find out your car’s value. Let’s say your car is currently worth $6,000.
While the car is still running well, you’ll want to set aside money for a new vehicle. Let’s say you set aside $300 a month for your new car. In one year, you’ll have saved $3,600. Couple that with the $6,000 value of your current car, and you have $9,600 available for a new-to-you vehicle.
When you sell your current car, remember you’ll get more for your money if you sell it yourself rather than trading it in at a car dealership. Selling and shipping your old car online is really easy now with car transport services like http://www.cartransportfinder.com
Let’s say you find a nicer vehicle for $9,500. Now, drive that car and continue adding $300 a month to your car savings fund. In two years, your current vehicle may be worth $7,500, and you will have saved another $7,200. Now, you can buy a newer to you vehicle for $14,500.
Keep repeating this cycle for several years (and several car purchases). In less than 10 years, you’ll likely be at the type of car you would normally buy with a loan, but you’ve bypassed all of the interest you would have had to pay if you’d taken out a car loan each time.
Let’s say the car you would ultimately like to own (and are likely to own after less than 10 years on this plan) costs $25,000. Now, if you plan to keep the vehicle for 10 years, you’ll just need to set aside $225 to $250 a month for 10 years to buy another car outright when you’re ready to replace your current car. (You could set aside even less if your vehicle, after 10 years, still has a good resale value.)
Think about how many car loans you’ve had and how much you’ve paid in interest over the years. If you are disciplined enough to set aside money on your own every month and you can put your ego aside and drive a car that is a “beater” at least in the beginning, you’ll save yourself tens of thousands of dollars in interest over your lifetime.
Photo Credit: flickr by The National Roads and Motorists Association