Guru Tip: How to Stop Making Car Payments

Americans love cars, it’s almost like it is in our DNA. Americans now also have becomes accustomed to, and slaves of a monthly car payment. This simple formula complements of your official Town Guru will help you eliminate car payments forever and put you in a nicer car for less money!

Well, did we say eliminate? The better word would be reallocate and make the car payment work for you. So how does this work? Compound interest can be your friend, but for most people, it can also be your enemy. A typical $20,000 car loan over 5 years can cost the consumer between $7,500-$10,000 in interest.

Instead, I want that money to work for you. While you will not earn the 3% to 10% that the bank will charge you, interest can still be your friend. So how do you accomplish this?

Most people can’t wait until their car is paid off and quickly buy a new one. I want you to resist this urge. Instead, I want you to continue to pay your car payment but now put it in an interest bearing savings account, investment account, or money market. You will be amazed at how quickly you save money, while making interest. In addition, you still have the equity of your current car. If you can make 3-5 years of payments, and these days most cars are built to last 10 years or more if you take care of them, you will have the cash that you saved, plus the equity of your car, to purchase a new car and begin the cycle again. 

The great part is, when you start this cycle a second time, you are doing so with a new car. Meaning you can save even longer if you don’t buy another new car for let’s say 7 years. Imagine the car you can buy at that point! And this is all while paying no interest.

Bonus tip: If you sell your car on your own, you can get a higher price than trading it in at a dealership. It can take a little work, but it can also give you an extra $1500 to $2000 or more to put towards your next car. 

So let’s make your money work for you, instead of for the bank. In the long run you will have a nicer car and more financial freedom knowing that if you have an emergency, you can skip a payment.

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