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Planning around car loans

I was out walking with my mother the other day when we passed the most gorgeous Mini Cooper. It was so pretty I had to ogle it, and I’m rally not a car person. It was even pretty in orange! My mom noticed the look of love I was giving this car and we started talking about what we dream our next cars will be. Then came the part where we started talking about When.

I shared with Mom my plan to buy an new car in three years, and pay cash. She looked at me like I was insane. I tried to explain it for her, but she doesn’t really have the passion for this topic that I do, so we gradually moved on to other things.

But I know, in three years I’m going to be able to afford the next car and pay cash. I know because I’ve done my homework and I’m planning ahead, and we’re already two years in to the five year plan.

See, I have a car payment but I’m not paying it to a lender. I’m paying this payment to myself. It was an easy transition because of the way we did it, but the key has been making the money invisible. When we made that last car payment, I set up a direct deposit into a special car fund with the dollars that would have been toward the financing.

Making that money hard to get to means that I have to deliberately set my plan back in order to access it. And this little psychological barrier has been the biggest key to success.

Crossposted from Journey to the Center, comment here or there with OpenID.
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This sounds like a great plan!

I suree hope it turns out the way I want. Worst case, my loan is less, and that's always a good thing. :)

I do exactly the same thing. I have my "car loan" money transfer from my checking account to an online bank. It would take a couple of days to move it back to my checking account. The last time I bought a car the cash I had in that account wasn't enough so I had to get a car loan. I set up the car loan to be the same payment as I had been putting in savings (~$250/month) and when it was paid off just kept it going into the savings account.

I've been spending $250/month on my next car for several years now. (We get a newish car about once every five years.) Each time I come a bit closer to being able to pay for it entirely in cash.

By the time I'm retired I won't be able to say "the future will be so much better than now, I'll have the FUTURE pay for my current consumption - plus interest!" At some point that just stops being true that the future will be better. I've been worried about my husband losing his job for a couple of years now. He's 57. I think I'll refrain from saddling the future with car payments.

I totally get what you're saying about taking a loan against my future assumptions. I've been unemployed, not by choice, previously so I'm always hedging against that. Emergency funds, house payments, there's a whole list of things. And really, I don't expect that I can afford my own elder care, let alone whatever my parents cost. I figure if I keep living within my means several years ago, it won't be such a terrible shock if I end up back there some day.

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