Budgeting, Car Buying, Car Loan
May 16, 2019
It didn’t surprise me to read that more than 40% of Americans say they are stressed out by their car loans. About seven million people with a car loan are at least 90 days behind on their payments. Moreover, the average monthly payment for a new car loan is more than $500. I am surprised just 42% of Americans said their car loan was a stress point.
What is so very sad in my opinion is that you have no one to blame but yourself. If you are overspending on a car loan that makes it impossible to save enough for retirement, or fully fund your emergency savings account, it’s time to take responsibility for your bad decision making.
Why did you buy that specific car? Can you honestly tell yourself it was the most affordable car that would be reliable and safe and allow you to focus on other important financial goals? I think if you are honest, many of you know you came up with some sort of excuse for buying a more expensive car.
One costly excuse you probably told yourself was that it was no big deal if you took out a long loan. The average loan term these days is nearly six years. Six years where you keep making payments. Any car loan that you need to stretch past three or four years is a signal that you are spending way too much. Walk away from that make and model. Lower your car budget until you can get it to a level that will allow you to pay it off in three or four years.
Does that require tuning out the slick sales pitch about a longer term car loan? Yep. This is all about standing in your truth, and not succumbing to lenders who don’t care about your financial security.
Given how reliable cars are these days, I think one of the smartest moves is to shop for used cars that are a few years old. The price will be a lot lower, making it easier to borrow less and get the loan paid off ASAP. A class of used cars, labeled “certified preowned” or CPO come with a manufacturer’s warranty.
Don’t you dare tell me you deserve a new car. You deserve financial security. Period. End of conversation.
Saving, Family & Estate Planning
Credit & Debt, Saving, Investing, Retirement