Let’s talk cars for a minute. I’m a car guy. I love cars, particularly the fast and expensive variety (not that I have one). Maybe you’re a car guy or gal too? Maybe not. Even if you’re not, you probably have a car or need a car, or you will someday.
There’s an unfortunate truth about cars that they’re both expensive, and often necessary. To overcome this conundrum, most people take out a loan when they buy a car. They use debt. I’ve done this too, several times. I’m not happy about it, but that was before I got serious about my finances.
Ok, are you ready for something controversial? Don’t get a car loan. It’s debt, and as such, it’s something to be avoided. Stick with me for a minute.
Why do we take out a car loan? Sometimes we desperately need a car and there is literally no money to be had for it. That’s an unfortunate situation, and I sympathize if that’s you, but it’s not the case most of the time. No, the majority of car loans exist because we’re impatient and prideful.
We want the updated technology. We want a faster engine. We want more space. We want a nicer interior. Maybe we’re just bored of what we’ve got. Are any of these things needs? Almost always no. We want, and a car loan allows us to have.
The average length of ownership of a car is roughly 71.4 months, according to research by R.L. Polk. Contrast that with the average car loan being roughly 65 months, and most people will almost always have a car loan. Add on top of that the average new car loan is almost $600! This is insanity.
I recently talked about why debt is bad in a post on buying back your income from your creditors. Not having a car loans is a fantastic step towards having the full power of your income at your disposal.
And don’t think because you don’t have a car loan that you can’t own your dream car. In my next post, I’ll explain how you can buy your dream car without ever taking out a car loan.