Don’t Worry; Everyone Has a Car Payment

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car payment

One of our goals here at Frugal Rules is to dispel common financial myths by shedding light on them. The topic we’re tackling today – the ideas that everyone has a car payment so that makes one okay for you, is a powerful one that, when just assumed rather than thought through can sometimes keep us back from achieving our financial goals. As a continuation of our series covering the worst financial advice in all the land, I asked Holly from Club Thrifty to share questionable money advice she received in the past.

Holly said, “I remember that, when I bought my first car on my own, the car salesguy told me that ‘everyone has a car payment’ anyway so I might as well get what I want and get used to paying for it monthly! I ended up spending $25,000 on that car, and it took me FOREVER to pay it off!”

Debt Is Normal


The advice Holly received is unfortunately the norm. It reminded me of something that my own mom told me once and that is, “Debt is a part of life.”

My mom meant that most people had mortgages, etc. and she’s right. Most people do. However, for the salesman to tell Holly that “Everyone has a car payment,” is simply not true. In fact, it’s a sleazy sales tactic designed to con people into buying more car than they can afford.

Obviously Holly is quite successful now and is one of the most financially savvy people I know, so she wasn’t affected long term by the car payment. Still, what about the people who live their lives thinking that car payments, house payments, and just debt payments in general are never ending?

Why Pay it Off?


The worst part about this “advice” is that if people believe everyone has a car note, then what’s the incentive to pay it off? What’s the point in keeping a car that’s five years old when you could just go out and get a newer car? After all, everyone has a car payment anyway, so why should you go without one?

It takes a confident person to drive around a beater. It’s very common to do so in the personal finance community, but in general many people find it difficult to get into a run down, beat up car after work when all their co-workers have newer vehicles. This is part of the problem.

The Investing Debate


We’ve heard it before, though. Car payments are fine as long as you can get a better return in the stock market. Why pay it off in full when you can use the money you would have spent on the car to invest in a brokerage account instead?

Many people say this, of course, but very few people do it. My father in law is one of those people, but he’s an incredible example of financial stability (I’ve written about him before.)

I’ve Never Had a Car payment


I currently own two cars. They are both paid off. They are both old, 13 years and 8 years old respectively. I’m scared they’re going to break and then I’m finally going to have to go out and buy a car in the traditional way. My first car is the one my parents gave me when I was a teenager to go to college, and now my husband drives it. My second vehicle is one I bought from my parents (for the reduced family rate) when my twins were born.

*Related: Did you know it’s possible to get free gas? Check out our guide on the best ways to get free gas gift cards and lower your fuel costs.*

I know that someday I will have a car payment, but you can bet I’ll make sure my kids know that not everyone has a car payment. Debt doesn’t have to be a part of your life. It can be useful, like helping you achieve educational goals when used in the right way, but ultimately it’s important that everyone is aware of slimy sales tactics, like the ones utilized by the car salesman that Holly had to deal with all those years ago.


Do you have a car payment? Are you comfortable driving around a beater or do you feel that you have to impress your co-workers or clients to get ahead? Is a car payment a necessary, yet temporary evil for you, or do you accept is as an unending part of life?

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Catherine Alford is the go to personal finance expert for parents who want to better their finances and take on a more active financial role in their families.


  • Petrish @ Debt Free Martini says:

    I am almost done with paying off my car loan and I cannot wait. My plan is not to purchase another car until another 5 years and hopefully I will be paying cash. Also the statement that debt is normal is what most Americans live by and use as an excuse for why debt has them in a choke hold. Not me….debt will never be normal too me.

  • Matthew says:

    Great article… We have two paid for cars and don’t plan on ever going back to car payments. However, I think you need to consider the end of your post when you say that someday you’ll have a car payment. I would strongly suggest that (if you haven’t already) you start saving $5-8k for a good used car and pay cash. You can get a decent car in that price range, and certainly one that will last long enough to save up even more for an even better used car by the time it breaks down… Then you will have truly broken free from the vicious car payment cycle.

  • Holly@ClubThrifty says:

    Sigh. If only I could get that 25K back!

  • Anne @ Money Propeller says:

    We had a massive car payment, for a little while. It was massive because we wanted to pay it off as quickly as possible!
    I do know people consider it normal to just always, always have a car payment and that sucks. That’s not a good way to live, at all.

  • Emily @ Simple Cheap Mom says:

    I’ve heard some pretty compelling reasons for buying a new car, but I’ve always figured I’d buy late model cars used for cash. I once paid my parent’s car loan to drive their car, but decided I’d rather go car free than pay the second half of their car loan. I’m fine driving a beater most days, but I do feel a little funny when I go somewhere with valet parking…

  • Travis @debtchronicles says:

    Well, cars don’t last forever, so if you don’t have a car payment I would be those people are saving each month to pay cash for their next car. Technically, that’s still a car payment. 🙂 The difference is some people pay interest on their vehicles, and some don’t. I have a car payment, but my interest rate is 1.9%. I hope to pay cash for my next vehicle, but if I have to have a car payment 1.9% isn’t bad for an interest rate.

  • Clarisse @ Make Money Your Way says:

    My father in law owns a 15 year old car, but he kept on complaining about the maintenance that’s why he decided to purchase a new one. His company offered him a car loan, but he refused it because he doesn’t want to have a car payment.

  • Lance @ Healthy Wealthy Income says:

    No car payment. My favorite car is a paid off car. My parents didn’t have a lot of money growing up and we had horrible cars and broke down all over the place including in the middle of Nevada during the night. I determined I would never be in that situation because my parents spent a lot on repairs and I knew it would be worth spending a little bit more up front to avoid the worries of breaking down and repairs…and also wanted to avoid debt. I like cars that are returned as leases because they are still in great shape, low mileage and usually a good price. We’ve had our current cars for 7 and 8 years, no major repairs or costs other than usual maintenance and tires.

  • Kathy says:

    We have 2 paid off vehicles. One is a 2004 pick-up truck and the other is a 2007 Lexus. Now before everyone throws stones at me for having a luxury car let me explain. My brother-in-law bought the car for his wife for Valentine’s day. When she died from breast cancer 5 years later, he couldn’t stand the thought of a stranger buying it or just taking it to the dealer and leaving it for them to sell. Hubby and I were nearing the time we would need to replace a vehicle so we offered to buy it from his brother. We paid cash for a 5 year old vehicle with only 15,000 miles. His brother was happy that a stranger wasn’t taking it so it was a win-win for both of us. We plan to keep both vehicles until the wheels fall off. Whether we pay cash for a different car will be determined by whatever extra cash flow we have vs selling some investment to pay for it.

    • Cat says:

      My cars are both luxury cars so no hating here. That’s the perk of parent hand me downs on my end or on your end helping out a family member.

  • Josh says:

    Start saving now to pay cash for a NEW no frills Honda Civic or Honda Accord. Drive that new Accord for 8 years while banking the car payment you would have otherwise paid. At the end of 8 years, sell the Accord and pay cash for the next new Accord.

    Rinse and repeat. The Accord holds it’s value so well that this ends up being an incredibly inexpensive way to drive a newer reliable car. No debt needed.

    • John Schmoll says:

      Good point Josh. If you do it right, that could potentially work out for you in the long run. I would do it slightly differently though and not buy brand new, but maybe a used Honda that is 1 0r 2 years old to save a little bit more money. Thanks for stopping by!

    • Cat says:

      Hey Josh – I think that’s a good idea for sure. I’ve actually heard that about accords before. My husband wants me to drive an army vehicle lol. Nothing is big enough or safe enough for me and the kids, so I think I’d have a hard time convincing him!

  • Miriam Kearney says:

    the federal government in Canada allows 43 cents per km driven as an expense against health care costs if your doctor is more than 40 kms from you (which is the case often if you don’t live in a big city). I use that as a figure to gauge my true car cost and set aside that amount (less what I actually spent on the car, i.e. gas, maintenance, insurance, licensing) as savings for a new car. It helps me to remember what it truly costs to keep a car on the road – it’s a whole lot more than the car payment – and it makes me conscious of the cost of each trip so I make good use of them.

  • Tonya@Budget and the Beach says:

    It’s both really. I have a car payment but it’s for a decent used car at a very low interest rate. My car died and I had no choice but to get one. I did not buy one or do not care to impress anyone though. I could have paid cash, but it would have left me very cash poor, and since my worked slowed down I would have been SOL if I had put all that money towards a car, so I’m very happy with my decision, although I would have wanted my subaru to last longer. 🙁

  • Andrew@LivingRichCheaply says:

    It drives me nuts that people think that having a car payment is normal and even worse is that once the car payment is paid off, they think it’s time to get a new one! I did buy a newer used car (cash) when my then 13 year old car was becoming a little unreliable and we were having a baby so I was a little worried about the unreliability. Plus I have a long commute to work.

  • Kim@Eyesonthedollar says:

    I guess it depends on what your idea of a beater is. Our cars are 2006 and 2008 models. I don’t feel like they are that old, but I think many people would consider that time to get a new one. Realistically, cars should run for at least 200k miles, so even if you do have to have a payment in the beginning, people should be able to drive a paid off car for several years after payoff is complete. I think because we are taught that everyone has a payment, most people do trade in once their car is paid off or close to being paid off.

    I hear people all the time who justify new car purchases by saying that their payment is lower or the same on a new car than it was on their older one, but they aren’t considering that they could have paid the old one off sooner and had no payment at all!

    • Cat says:

      I don’t consider my cars beaters at all, even the one that is 13 years old! I agree with you. People will justify and make excuses all day long about their car notes!

  • Grayson Bell says:

    I’ve had car payments and still do right now. I have one car with no payment and another with one. It depends on what you want to do. I was able to get my loan for less than 2% and I wanted to use the cash for something else. I can pay off the car when I want, but with such a low rate, I am earning far more with my investments.

  • Debt Hater says:

    Currently I don’t have a car payment, and I never have as I am still on my first car. I bought my first car used (though it only had one owner before) and will probably by my next used as well. My car is 11 years old now and still going strong as I approach 100k miles.

    Though if interest rates stay as low as they currently are, it can sometimes be wise to get a car loan and invest the money you would have used. The problem is a lot of people go out and SPEND that money!

  • Jason B says:

    I haven’t had a car payment in almost a year. It feels good not to have one.

  • Prudence Debtfree says:

    “I know that someday I will have a car payment,” Maybe you won’t ever have a car payment : ) The 1999 Dodge Caravan that we bought used (and eventually paid off) has become a bit of a beater over the years – almost 16 of them. So I’m comfortable driving a beater. There’s a lot of freedom in that comfort!

    • Cat says:

      Maybe so. I’d be 100% fine in a beater but hubs is so obsessive about safety. He’s worried the car is going to break down with me & the kids in it in the snow and he’ll be stuck at the hospital or something lol.

  • Brittany @ Fun on a Budget Blog says:

    My fully paid for car was an unreliable nightmare, so when it broke down for the final time I got a measly $600 bucks for along with the bad advice that everyone has a car payment, so it wasn’t a big deal to join the club. I’m just over halfway paying it off and once I leave the club, I’m not going back!

  • Jayson @ Monster Piggy Bank says:

    I have a car that I fully paid off. It took me years of course, which I don’t want to experience that again. I have learned a lesson and am happy I am debt-free when it comes to car loans.

  • How To Save Money says:

    I’m torn on this topic. A part of me says that I can get by with an old car but then a part of me says that a new car would be more energy efficient (thereby, offsetting my payment) and then there’s the social pressure!

  • Laurie @thefrugalfarmer says:

    That’s just another lie we all tell ourselves, I think, so that we don’t have to be accountable for poor financial choices. We swore after being saddled with a $452 car payment for 5 years (it was 0% interest, so it was “okay”) that we’d never do that again unless we had the cash in the bank beforehand.

  • kay ~ says:

    Our minivan is a 2002 white (what was I thinking?) Ford Windstar. I adore it. It was a Florida car so it has no rust. I would walk before I ever financed a car again. We bought the Windstar in 2013 so it was already a bit long in the tooth. We paid cash. Sorry for what you went through Holly. I can remember when that was what everyone said ~ “It’s okay, just finance it, charge it, etc. EVERYONE does it!” pfffffffffffffffffttttttttttttttt!

  • J. Money says:

    I must be the most confident person around then! Say hello, FrankenCaddy!

  • Mrs. WW says:

    As I was reading this post I was thinking of a time I worked as a mortgage processor. I rarely talked to the customers, but did once and the lady was super sweet. “Yes, it will be so nice to finish this refinance and have the bills all paid off. I don’t ever want to get in this debt situation again– except for the car, you always are going to have a car payment.”

    I was flabbergasted and sad for her. What a sad plan! She had no plan to rise above.

    I was happy that you understood UNTIL YOU SAID ALMOST THE EXACT SAME THING! Sure, things happen sometimes but don’t PLAN on them to happen badly! Do not plan on having a car payment– ever!

    It so totally can be done. Take your own advice and don’t fall into “Well I guess I have to have a car payment” trap.

  • Amanda L Grossman says:

    Good one!

    Actually, I’m a 32-year old who has NEVER had a car payment in her entire life…and I’m on my 5th car! They’ve all been beaters that I paid a few thousand dollars cash for and drove into the ground (i.e. until a big repair was needed that didn’t make sense given the cost + mileage + age of car).

    It’s been awesome!

  • Sue says:

    I love my old cars. I can’t understand why anyone with kids would drive a newer car. My kids wreck everything! Here’s an unexpected upside to driving an old car-you find out who your real friends are

  • Tom says:

    While it’s not true that everyone has a car payment, it is true that, at least for most of us, our cars will have to be replaced at some point.

    I paid cash for my car in 2006. Since then I’ve made $300 monthly “car payments” to myself. I have almost $20K squirreled away in an online savings account, waiting for the day when my car with 174,000 miles on it finally bites the dust. I’d rather pay myself than pay the bank.

  • Free to Pursue says:

    We have no monthly car payments for our 2009 Toyota, which we bought used in 2011. Paying with cash also enabled us to avoid financing charges and allowed us to negotiate a great deal.

    We intend to drive it to the ground.

    Our other vehicle? My bicycle ;).

    • Mrs. WW says:

      Yay for bicycles! It takes a long time to drive a car into the ground if you make your bicycle your first choice.

      Come to think of it, it takes a longer time to drive yourself into the ground if your bicycle is your first choice. ; )

  • Jacquie says:

    When I was about 20 I financed a brand new Mazda 3. My previous car had run its course, I had no money to put down, and it seemed a better to get the low interest rate for a new car at the dealership than buying used and getting a bank loan. It was also necessary to have a car for my job. I loved that car and planned to drive it until it died (Mazdas tend to last a LONG time).

    But then I moved to the city, changed careers and no longer needed a car for work OR social reasons. I ended up selling at a huge loss but I’m still convinced I made the right choices considering my situations at the time. Now every day I’m thankful for NO car payment and I can use my money for travel instead.

  • Jenna says:

    I am lucky to have a paid for car. I plan to drive it into the ground – 130k miles and counting!

  • Andy@artofbeingcheap says:

    Good advice. What really gets me is the people who keep trading in cars and each time their monthly payment keeps going up because “its only an extra $50 per month”

    That’s on top of the extra $50 from the last trade in, the extra $50 from the trade in before that, and the payment that was already too high before that.

    Car payments are no good, and I think everyone should make it a goal to get rid of them then never have one again.

  • Abigail says:

    With some scrambling, we were able to pay for our new-to-us car in full when we were in an accident and were told our car wasn’t worth keeping.

    The one before that — also needed because of an accident, though at least that time it was someone else’s fault — we did have some payments on. We paid it off in about a year and a half (it was used, so an easier amount to pay off) thanks to a yearly bonus etc.

    We’ve agreed that — barring any more unexpected accidents — the next car will be my husband’s dream car: a Challenger. So we’ll probably have payments, but we’ll be saving $300 a month to build a down payment up. That should help.

  • Casey says:

    “I know that someday I will have a car payment”

    I was disappointed to read this statement at the end of an otherwise great post. Why must you someday have a car payment? You just need to save up for your next car and pay cash! No need to buy a brand new car that will lose 1/3 of its value when you drive it off the lot. Buy a 1 or 2 year old car, which will last a LONG time, for cash!

    We have two paid-for cars and we will NEVER have a car payment again.

    • Cat says:

      Hi Casey! Sorry you were disappointed. I definitely didn’t mean to imply I’d buy a new car. I would never do that. The car payments would be for a used car. Some day we’ll buy a car in cash but until my husband finishes medical school and residency all of our cash will be kept in emergency reserves and investments. We need to make up for lost investment time since he’s been in school a long time without a 401k. This is far more important in our own personal situation than putting 10-15k cash towards a car. Everyone’s situation and life path is different. That’s what makes personal finance personal. 🙂

  • Joe says:

    I had 2 cars that were paid off. Then son #1 turned 16. So now I have a car payment on my new Accord. I will pay it off in 2015 ( my financial goal for the year). Son #2 turns 16 in 2016. He will inherit a minivan from Mrs. Joe and she will need another car. When #2 goes to college, he will get the Accord. Two more cars in the next 4 years while saving for college. I am in the expensive age of child raising. Young people, Plan Ahead!

  • Cecilia@thesingledollar says:

    No car payment — I paid $4000 cash to a friend for her old car about 15 months ago. Actually, I paid $2000, and my parents paid $2000, as my graduation present. I’d asked them for that much as a down payment on a car (which I intended to buy used) but ended up getting the opportunity to get a cheaper car that I trusted instead, so I went for it. I think it was the right decision; the car is ancient (1998!) but at the time I bought it, it only had 90,000 miles on it, had recently had a bunch of work/replacement parts put on it including new tires, and since it’s a Honda it ought to be reliable for another 100K if I want to take it that far. Honestly, I’d rather not — I’d like to own it for the next couple of years only and then get something that I like better. I really want a 4-door, not a 2-door, and a bit more cargo space. I dunno. We’ll have to see where I end up moving and what my salary will look like before I can make serious car-buying plans. I wouldn’t be opposed to taking on a car loan if the interest rate were right, although I’d probably make an effort to pay it off early.

  • Tory Williams says:

    I have 2 paid off cars , they are not in the best condition. But I love no payment. What I do is , if going somewhere far , or a trip . I rent a car, so no head ache. And still no car payment.

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