Speed Past Car Debt With This Simple Timing Trick


I like goals that are challenging, but achievable. Accordingly, I set a goal to keep a car for 12 years before burying it. A few decades ago that would have been unrealistic. Thankfully today's vehicles, if properly maintained, can run for 200,000 miles or more.

This is good news for the frugal, because it creates an opportunity to be without monthly car payments for years. Even if you're a two-car household, with a little creativity and discipline, you can still eliminate those nasty car payments for years at a time. (See also: 7 Easy Ways to Calculate Your New Car Budget)

Why is it so important to be vehicle debt-free? Because cars and trucks are bad investments. They lose value. To make matters worse, while their value falls, they also drain your monthly income as you make loan (or worse still, lease) payments along with maintenance and repair expenditures. That's money you could otherwise put to much better use. (More on that later.)

How to Stagger Car Purchases and Minimize Debt

So, how do you minimize the financial damage by staggering purchases? Here's a schedule to consider following (it's the one we follow in our household):

  • Now through year six: Household member #1 buys a car, takes out a loan, and pays it off in three years.
  • Year six: Household member #2 buys a car, takes out a loan, and pays it off in three years.
  • Year 12: Household member #1 replaces 12-year-old car with a new one; takes out a loan and pays it off in three years.
  • Year 18: Household member #2 replaces 12-year-old care with a new one; takes out a loan and pays it off in three years.
  • So on and so forth.

This allows you to spread out new car purchases every six years. Because each car is paid off in three years, you never have more than one car payment to make at a given time, and 50% of the time you don't have any. If we assume a loan payment of $400/month, then for each three-year period when you have no payments, you can save $12,000, or $24,000 in a single 12-year cycle.

What will you do with that extra cash? Prepay another debt. For example, pay off your unpaid credit card balance. Or maybe a student loan. Doing so frees up even more monthly cash flow. Maybe then you'll have saved enough for a down payment on a house.

See where this is going? You're getting ahead financially, big time! And it all started with spreading out and staggering your vehicle purchases.

So take financial advantage of advances in automobile technology. Change the oil regularly, free up cash flow, and use it to get farther ahead on other debts.

And while you're at it, consider saving up for any future vehicle purchases, thus avoiding car notes, in the first place. By doing so, you'll eventually stop the cycle of car debt altogether.

How long do you keep a new (or new to you) car before replacing it?

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Guest's picture

I am currently driving a Toyota Rav4 that I purchased used in 2004. I paid cash for it and have the oil changed, tires rotated etc like clock work. It has 255k miles on it and shows no signs of stopping!

I love it so much I may buy another Rav4 when this one needs to be replaced!

Guest's picture

A brand-new car, well cared for, can last longer than 12 years. I've got one, still running like a top, and it's approaching 20. It still looks great, too. I've been planning for a new one, keeping up with what's out there, so I'll know what to buy next, but this car keeps going and going, with few repairs necessary.

Guest's picture

How do you pay a 400 payment off in 3 years? How long is the original loan?