Want to Improve Your Long Term Finances? Stop Doing This One Thing

This post may contain affiliate links which help me keep the site running. All opinions and recommendations are 100% mine. I never recommend something I haven't tried and used myself.


I vividly remember the day that I realized I was party to a privileged upbringing. I am dating myself here, but it was 1998 and I was a freshman in college at the time (and yes, it really did take that long for me to get it!). I was attending a party with some of my fellow Lowe’s employees after work late one night. As I was leaving, my friends walked out with me to my car. I unlocked the door of my full-size ’92 Mercury Grand Marquis (similar to the one pictured above only mine was a pinkish-gold color!) and one of my friends gasped. Embarrassed by the “old person” car that I was driving, I cringed as I asked her what was wrong. Her eyes were wide as she was taking in the wood-grain trim and the smooth leather interior while simultaneously asking me how much my payment was.

I stopped in mid-motion and blankly stared at her, “huh?” I was literally clueless what she was talking about. It took me a full minute to realize she was asking how much money I pay each month for that car. I didn’t carry a payment on Big Bertha (that was her name, haha!). I was fortunate enough to have parents who could purchase a pre-owned car outright for me. She wasn’t mine alone—they retained the title and registration and reaped the proceeds of her eventual sale, but she was mine to drive and she didn’t cost me but the gas and insurance.

As a kid in middle-class America, you often feel like everyone around you grows up just like you do. Like your normal is everyone else’s normal. You take some things for granted, sometimes unwittingly. I was immediately humbled by this girl whose father had passed away while she was in high school. She dropped out to get a job and help her family cover the monthly expenses. She had a car payment because it was an absolute necessity for her. No car meant no job. No job, no food. I often think about her and wonder how she’s doing now. I am grateful for the mirror she held up to me that day.


So know that I do not take lightly what I’m about to say…

I firmly believe that the acceptance of the mentality that “everyone has a car payment” is crushing the middle class especially hard. You need a car, I get it. But you don’t NEED a car that requires a high payment. Stop letting the car salesman sell you a car payment and make him do his job: sell you a car!

I cannot tell you how empowering it feels to walk into a dealership with a check and walk out with a vehicle. Seriously, if you’ve never purchased a car for cash before, prepare to feel pretty dang awesome the first time you can! I felt like Bobby Axelrod (any Billions fans out there?) before I even knew who he was! 😀 Not to mention, signing your name on that little slip of paper–or handing over a huge stack of cash–gives you a gut check far beyond signing some financing agreement. It’s your last line of defense against spending more than you can truly afford.

I know some couples decide not to have two car payments at the same time, but that’s not going far enough. According to Edmunds.com, the average new car payment is $483 per month and loan terms now average at least 60 months (with some people financing as long as 84 months!). After five years of payments, many people simply trade in, or more specifically trade up, and take on a new loan with another car. You have to stop this cycle if you want to get ahead!

Resolve to never finance another vehicle after your current one is paid off. Then from here on out, pay yourself that car payment into a savings account and when the time comes, you’ll have all the cash you need to purchase a worthy replacement outright. Assuming the average $483 a month is socked away for five years in a savings account earning a measly 1% APY, you’d have $29,728.79 to spend on a vehicle of your choosing. Can you picture yourself walking into a dealership with that in your pocket? Just think of the bargaining power that cash gives you!

Aim to keep that car at least 10 years or as long as it’s reliably running for the best financial impact. Obviously everyone’s commuting needs vary and affect how long your vehicle will last you, but really commit to keeping it as long as possible. Our family vehicle is seven years old and shows no signs of slowing down soon. It can be done if you try to drive sensibly and invest in proper maintenance.

If you keep your car for 10 years and you spent the first five years making payments to yourself, you’ll be able to watch that balance grow for five years in a savings account earning interest, while enjoying no payments. Without any additional deposits, at the same 1% APY, your balance will grow to $31,252.37 increasing your buying capacity even more. And that $483 a month you were putting away can now be spent freely or stashed away in another account for some other savings goal. Don’t need that much money for a car? Great! Adjust your payments accordingly to give you some breathing room in your budget as well as the cash you’ll need for your replacement vehicle.

Unless you have disposable income to throw away, you should probably avoid buying a new car. That factory warranty isn’t reason enough to take a 30% depreciation hit in the first two years of ownership. Save yourself some major cash by buying a pre-owned car that’s two years old or older. Many dealerships sell certified pre-owned vehicles for slightly more if that designation makes you feel safer.

I would not opt for an extended warranty. They are rarely worth the investment and your emergency savings account should cover any repairs you may need. Any factory warranty remaining on a pre-owned car should transfer to a new owner without cost.

Finally, try to stop comparing your situation to others. I’ve had my car for five of its seven years. Occasionally I daydream about what I would pick out were I to buy something newer, especially as I see friends driving around in their shiny new cars. But I just keep talking myself down. My car is reliable and safe and is helping me reach my financial goals by not sucking money out of my bank account each month. Every time my eyes start wandering at all the nice vehicles driving past me, I pull out a physical picture of my dream: an oceanfront vacation home on Topsail Island like the beauty pictured below (dream big or go home I say!). The longer I hold off on replacing my car, the closer my dream becomes a reality.


“You got a dream, you gotta protect it. People can’t do something themselves, they wanna tell you that you can’t do it. You want something? Go get it. Period.”

–Christopher Gardner, The Pursuit of Happyness


Don’t let anyone–even yourself–sabotage your dreams of living a debt-free life!

So what do you think? Can you hang on to a car for 10 years or more? Would love to hear your thoughts in the comments!

About The Author

Amy Davis

This post may contain affiliate links which help me keep the site running. All opinions and recommendations are 100% mine. I never recommend something I haven't tried and used myself.

I’m a former therapist turned stay-at-home mom sharing my tips and strategies to achieving freedom from debt. When I’m not blogging, cooking, cleaning or otherwise catering to the needs of my 4 little persons, you’ll find me binge watching Billions. #goals


  1. Mat Frink | 23rd Mar 17

    Almost made that mistake as couple years ago thinking I needed a new vehicle because my current one hit 100,000 miles. Luckily I got wise, from reading articles like this one. 30,000 miles later it still runs fine with only about $600 worth of maintenance over the last couple of years. The could have been what I spend every 2 months with a car payment. Hope more people start developing this mentality.

    • Amy Davis | 23rd Mar 17

      That’s awesome to hear Mat! Yes, mileage is indeed just a number, not an expiration date. I am interested to see just how many miles I can get out of my car. It’s 7 years old, but only has about 62,000 miles since I don’t commute for work. Should have lots of life left.

  2. Matt | 22nd Mar 17

    Hey Amy, nice article! I have not written an article on it yet, but I always say that my biggest financial mistake was leasing a new car (which I think is ever worse than buying with a loan, because at least you have a car to show for it after that last payment!)

    • Amy Davis | 22nd Mar 17

      Thanks Matt! Yes, I absolutely agree with you! My husband actually leased a new vehicle before we started dating and he totaled it on Christmas day less than a year into “ownership.” I was so nervous about how the insurance would handle it given the mileage on it, etc. Luckily everything was covered (and then some) and I convinced him to purchase something reasonable and to never lease again. Odd to think that wrecking that SUV saved us a ton of money in the long run!

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