Dumping the monthly payment on a late-model fancy-schamnzy car has to be one of the most important steps in anyone’s journey to financial independence. Ten years ago, we took that step, literally, by accident.
In the year 2000, we bought a two-year-old 1998 Subaru Forester on payments. In 2003, with the car finally paid off, we were just starting to feel and enjoy freedom from those payments when the car got totaled in a freak accident. With the insurance settlement check in hand, it was time to buy another car. And so we asked ourselves: what should we do?
Should we again buy a two-year-old (2001) car and re-obligate ourselves to monthly payments? Or, since we were earning more than we were in 2000, should we actually upgrade our choice or age of car (and thereby also "upgrade" our car payment)? We could have. But we chose not to.
The fact is, NOT having a monthly car payment felt too good to give up. Both my wife and I felt the same way. Why go back to car payments? Before the accident, we were perfectly satisfied with our five-year-old Subaru Forester. What had changed? Nothing! We agreed: we would still be perfectly happy with a five-year-old Subaru Forester. And so we took that insurance settlement check and bought one for cash.
After we bought that second 1998 Subaru, every month thereafter we patted ourselves on the back as we used the freed-up cash from not having a car payment to knock down our other installment debt at an accelerated pace. And THAT made us feel good -- which compounded the positive reinforcement from our "buy an older car" decision.
Two years later, when changed circumstances demanded that we each have a separate vehicle, we did not have to ask ourselves how to proceed. We knew. With proper maintenance, that second 1998 Subaru -- at that point 7 years old -- had performed like a champ. Driving an older vehicle DID work. So the 1998 Subaru became my wife’s car and I acquired a 1996 Dodge Dakota pickup truck. And, again, no car payment required.
Now, it is 2014 and we STILL drive those two vehicles. My 1996 Dodge Dakota has just over 138,700 miles on the odometer. My wife's 1998 Subaru Forester has just under 237,700 miles on its odometer. They both STILL perform like champs. With continued proper maintenance, I can't see why/when this will change. And those vehicles have saved us a boatload of money in car payments, insurance premiums, and maintenance costs. Not to mention that the last of our installment debt got paid off almost 2 years ago, thanks in great part to our no-car-payments, drive-an-older-car lesson that we learned following that one-car freak accident eleven years ago.
Needless (?!) to say, driving older cars has made a monumental difference in our journey to financial independence. Even at a modestly estimated $800 a month to cover the loans and higher operating costs of 2 late-model cars, having -- and replacing -- 2 such cars periodically would have forced us to amass an additional $240,000 before we could declare financial independence. And that would have meant waiting 5 or 6 more years before becoming financially independent. But we did not have to.
What about you? Are you reaping the benefits of driving a paid-off, older model vehicle? Or is a monthly car payment still holding you back from attaining financial independence?