Tuesday, March 31, 2009

Car Payments

My personal finance philosophy is that if you are over 30 years old, you should not buy a car and finance it --- if you can’t afford to pay cash, the car is too expensive for you. (This is my general rule, and I do think there are a few exceptions.) There are financial gurus out there who will tell you similar rules. Dave Ramsey says no car payment ever, whereas I believe in your 20s the payments can help you with credit ratings.

Anyway, Chris’s 1990 Honda Accord was having some ball bearing issues and with his back problems, he could not fix easily, so we decided to sell and upgrade. We spent the last month or so going over options. With the purchase of a snowmobile last winter and a new time-trial bike for Chris, cash for a new Honda was no longer possible. We pondered whether it was it time for an exception to the rule as the financing was so low it was almost like paying cash. We looked at cheap cars that Chris could do work on and we would pass to Kristina soon and continue saving for new car next year, medium-priced cars that we would deplete our car fund, etc..

Yesterday, we paid cash for a 2000 Acura. It was the best deal that we found for cash price that we wanted to pay this year. And once I saw the heated seats and felt the warmth, all other choices for cash went out the window. Oh, how I love those heated seats! :)

Then just a few minutes ago, I saw where GM is now going to offer to make car payments for anyone who is laid off. GM will pay payment up to $500 for nine months. I was very irate. GM is virtually bankrupt, and the taxpayers will be paying these payments. Though my heart goes out for anyone who loses their job, everyone should be prepared for losing their jobs. Every financial adviser out there should tell you to have 3 - 6 months of expenses set aside, etc..

Living above one’s means is what got the US in this financial mess. I am now more convinced that if you can’t pay cash for the car, it is too expensive for you!


  1. I bout my first car when I was, 19 with a co-signed loan. I was able to pay it off in 4 yrs instead of the original 6 yr plan. Whereas, I do hope to buy my next car with cash, I understand if everyone cannot do it. Some ppl just aren't as fortunate or they hit hard times and don't have a choice.

  2. Julie, I totally agree for a first car. That is why I disagree with Dave Ramsey who teaches never to have a car payment. However, most of the time, people buy a car over their means. People seem to think driving a new car is a right, not a privilege.

    Do you know how many people throughout life has commented to Chris and me about our cars and asking why we don't upgrade? Just because we can finanacially afford a new car doesn't mean we have to. It gets rather annoying. :)

  3. The first car I bought, I paid cash. I did have a hard time getting credit, but it is possible. If I had to go back I would probably buy that same car but finance it for a SHORT while. Then again... Yep, people tell me I need a new car, but it still does what I need it to do. Works for me.