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Never Make A Car Payment Again Using This Easy Trick

Car payments are a major spending category for most Americans.

In fact, car payments are often just behind a consumer’s mortgage or rent payment in terms of total expenditures.

Sadly, some people are taking out car loans for as long as 96 months.

That means it would take 8 years to pay for a car. Insane!

Luckily, you don’t have to fall victim to the never-ending cycle of car payments.

You can escape car debt forever by changing just one simple thing when it comes to car ownership.

Own Your Car Longer – It’s That Simple

The only change you need to make to escape car payments, in most cases, is the length of time you own your car.

Really, it is that simple. Not following? Here’s how it works.

Let’s say you take out a 60 month car loan when you buy a new car. You may have even scored an amazing deal and only paid 0.9% interest on a $30,000 car loan.

Using this situation, your payment would be $511.52 a month, or roughly $500 for simplicity’s sake. Instead of ditching your car when you pay it off after five years, just keep the car.

Continue making your normal car payments, but instead of sending them to the bank to pay off your loan, send them to a savings account solely dedicated to your next car purchase.

Personally, we think CIT Bank’s Savings Builder Account is a good place to park your money.

Currently, they offer a great return on your money compared to many local banks and credit unions. Additionally, since the account isn’t at your main banking institution, you’ll be less likely to spend your car savings on other purchases.

Open a CIT Bank Savings Builder High Yield Savings Account Today and get up to 0.40% APY. See Site for full terms and conditions on this offer.

After just one extra year of car ownership, you’ll already have $6,000 set aside for your next car. Holding onto the car for 2 years longer would leave you with $12,000, 3 years would be $18,000, 4 years would be $24,000 and 5 years would be $30,000.

That doesn’t even count any interest you may earn on the money that you’ll keep in a savings account.

How Long Will Your Car Last?

Most new cars and even many used cars should last at least 10 years and well over 100,000 miles.

Of course, that won’t always be the case. Totaling your car in an accident can definitely shorten your car’s life. That said, other cars will last even longer.

After the initial five years you own your car, you’ll likely have at least one hefty maintenance bill to pay as your car ages. That’s okay because you’re saving $500 per month by having no car payment.

When you need to pay for a repair, take the money out of the savings account you have set up for your new car purchase.

It is much cheaper to spend $1,000 to repair a car to make it last another year than to spend $30,000 on another new car and have 60 more months of $500 payments.

It may put you behind schedule a little bit for your next car, but that’s no big deal in the big scheme of things.

But what do you do if you need to get a more reliable car before you can afford to buy another new car in cash? You have two options. The first is preferable, but the second is acceptable as you work toward car debt freedom.

Option 1: Only Buy A Car You Can Afford To Pay For In Cash

The best thing to do if you must buy a new car is to buy a new to you car you can afford to pay for in cash. Even if you only have $5,000 set aside, you can get a decent car that will get you around town for at least a couple years.

The best part of using this method is the fact that you won’t have a car payment and you can continue putting your $500 a month into a new car fund.

Since a cheaper car is likely older, you will lose less money in depreciation over the time you own it, too.

When you’re ready, you can sell your new to you car and combine the proceeds with your savings account and purchase an even more expensive car down the road if you wish.

After two years of saving, your new to you $5,000 car may only be worth $4,000. However, you’ll have an extra $10,000 in savings and can now purchase a $14,000 car.

Of course, if you find out that the $5,000 car works just fine for you, you don’t have to spend a penny more until you need another new car.

Once you have set aside enough money to buy your next car, you can use the $500 a month to fund other savings goals.

Option 2: Get The Smallest Loan Possible If You Must

Not everyone will have $5,000 in cash to buy a decent reliable car. If you find yourself with no cash saved, buy the least expensive reliable car you can find.

This will keep your car payment as low as possible and allow you to continue saving for a better one as soon as you pay off that tiny car loan.

Let’s say you get a reliable used car that has a $300 monthly payment. You can either make extra payments with the additional $200 to pay the car loan off faster or you can set the $200 per month aside in your new car savings account.

Once the car loan is paid off, devote the full $500 per month toward your new car savings account. Eventually, you can sell your current car and use the money you’ve set aside to upgrade your car if you wish.

How To Accelerate Your Car Debt Freedom Starting Today

So now that you understand how to work toward never having a car payment again, you’re probably wondering if there is any way you can accelerate this process.

You definitely can accelerate freedom from car debt if you’re willing to make changes.

Sell Your Car Today

Instead of waiting until your current car loan is paid off, you can make a big change today and sell your car.

Hopefully, you have equity in your car which means you can sell it for more than you owe on it. Even if you don’t, it may make sense to get rid of your giant car payment as soon as possible.

If you’re underwater on your car, save up enough money to be able to cover the difference between what you owe and what the car is worth. Once you have enough money, sell the car and pay off the loan.

Next, take whatever money you may have left over from your car sale and follow the instructions above.

If you have enough cash to buy a reliable used car, do that. If not, get as small of a car loan as possible and work toward getting a nicer car down the road.

By selling your car today, you vastly accelerate the process by getting rid of your current expensive car instead of waiting until you pay it off.

This will allow you to start saving for a new to you car faster and live without car payments for the rest of your life.

Living life without car payments isn’t difficult. Unfortunately, most people are impatient or want a nicer car than they can truly afford.

Don’t fall in the trap of having car payments your whole life. Be patient, buy cars you can truly afford and never have a car payment again.

Do you have a car payment? Or have you escaped car payments for the rest of your life? I’d love to hear your thoughts about the process of escaping car payments in the comments below.

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Stephen Downey

Monday 16th of March 2015

My dad was in the auto business nearly 40 years. He demanded from his family, recommended to his regular customers and suggested to everyone else that they never, ever finance a car for more than 3 years. That usually meant a higher down payment . It also meant the car would be worth more than the balance due for the entire term of the loan. He hated when 4 and 5 year financing was introduced, hated it when 0 down payments were required, and finally retired when 6 and 7 years financing came along. He felt like a crook, knowing that he had sold a vehicle to someone who would be so upside down for so long.

Lance Cothern

Monday 16th of March 2015

I'm glad your dad had some ethics and stood up to it. It stinks he had to retire, but at least he got out when it got crazy.


Friday 30th of January 2015

I got my car new (with payments for 4 years). it's 6 years old, in perfect condition (under 35K miles). I don't plan on selling it any time soon. When I'll need one, I'd have the time to also save money, so no more car loans for me hopefully


Thursday 29th of January 2015

Ok, I agree with your logic and we have two vehicles that are completely paid for. One we purchased from a family member for cash, and the other we paid the loan off early and have kept the vehicle for over 10 years now. However, if you are still putting the amount of the car payment into savings after you pay it off or use cash, isn't that the same as still making a car payment? And if you pay cash, you still have to make payments to the account to save up for the next one. Either way, that money isn't available for you to use without decreasing the amount you would pay toward the car at a later date. Aside from interest paid out vs. interest earned (which in today's environment isn't much), aren't you still making a car payment?

Lance Cothern

Thursday 29th of January 2015

The only way you'd end up with a car payment in perpetuity is if you don't follow the simple rule of keeping your cars longer. If you follow that rule, you'll be able to take some of the extra money you're saving and put it toward other goals unless you constantly keep upgrading to more and more expensive cars each time you get a new to you car.

So for example, you keep the first car 10 years and buy a new car for the same price as the first one. Then, 10 years after you paid for the cash car, you'd have enough money for 2 cars at the original amount. Of course, you could buy a car that is twice as expensive, or buy a car that is the same price again and still have an extra car's worth of money in the bank.

Brian @ Debt Discipline

Thursday 29th of January 2015

I think the best advice is to buy a car with cash. Save, save, save., and buy with cash. I recent met with two people working on starting a budget and one of their goals was a new or newer car. They each had surplus in their budgets, saving it for 10-12 months would give them over $5k to buy something newer and no monthly payments.

Lance Cothern

Thursday 29th of January 2015

Cash is king when it comes to cars :)