I am sure all you long time readers of this blog are like, “Enough with the life posts — what is going on with your budget?!” (Although let’s be honest, any hard-core personal finance gurus have no doubt dropped off since the last financial post was… oh, forever ago. Seriously, I tried to search the last few posts and got tired of clicking “Older Entries” at the bottom of the page.)
I’ve loved sharing my weekends, trips, recipes, decorations, and random every day thoughts with you all! But it’s probably time I update where my wallet stands. Part of the reason I haven’t been talking about my money is because there isn’t much to talk about. Things have been wonderfully quiet and automatic.
So today I’m going to give a little background on the car loan we have. I got an email from a reader asking: why someone like me (who hates debt and worked so hard to pay off my student loans) would willingly go into another loan?
That’s a great question. The simple answer? Convenience.
My old Honda (may it rest in peace), was rapidly declining at the beginning of this year. It would take a good four minutes to start the engine (took longer in the cold), stall out if you break too fast on the road (resulting in near-accidents on multiple occasions), and would shake uncontrollably when it reached higher than 60 mph (which is just plain annoying). I had owned this car since college, but I think my bi-monthly trips to and from DC in 2009 put a great toll on my sweet car.
And J’s giant Buick wasn’t much better. Both of us owned cars approaching their 20th birthday and we felt that at the age of 25 and 26 it was about time we owned at least one reliable car made this millennium. Plus we had about eight out-of-town trips approaching, and neither of our cars would be up for that challenge.
After a lot of back and forth, we decided to buy a new car after we got married. We chose to finance a newer car as opposed to buying an older model with cash. It took a lot of convincing (on J’s part) since I could hear Dave Ramsey’s voice in my head screaming about that decision. But the truth is that financing a newer car was just easier. We could have spent $1,000 to fix my car, or $2,500 on an older car, but we felt like that would have been a waste when it could take us six months to save for a new car and then would have to go through the whole process of selling, buying and transferring all the title and insurance. We actually had enough savings to buy a reliable car, but didn’t want to blow all of our savings away (which ended up a wise decision when we had to replace J’s car in July) so financing was a safer option. I don’t think that car loans are for everyone, and in the future I will save and pay cash for any cars we get, but in this situation it was a good decision for us. Plus, so far we have only paid $78 in interest, and to me that is worth the security of having one reliable car in our family.
Once we agreed (and ignored Dave Ramsey’s nagging voice), we chose a reliable, modest car (read: no power locks or windows [I know, sad]) and put together a plan on how we could intensely pay it off as soon as possible. Every bonus or extra cash has been added to our loan.
Right now we are on schedule to pay it off at the end of this month (woohoo!). It makes me so excited to have a reliable car and enter 2012 with zero payments and an extra chunk of our budget to use on savings, giving or spending.
I’m curious: What is your view on car loans? Have you ever had a good justifiable reason to finance a car? Or do you side with Dave Ramsey and think all car loans are evil?