Personal Finance

You Thought You’d Be Driving Your Car

But your car is driving you…

While having a car is arguably a necessity, it doesn’t mean you must get yourself in a debt that’s incredibly difficult to get out of. (Photo: mohamed Hassan)

“What Have I done and How Do I Get Out?”

About a week ago, my friend in America called me feeling devastated and hopeless. Her finances were in ruins and her flashy car was the reason. Her car payment is draining her pockets empty and she has years until it’s paid off.

She doesn’t live in the heart of the city where she has access to safe and affordable mass transit.

Now this is a real problem many of us face.

If you’re lucky enough to live in an area with good and reliable public transportation, then you’re fortunate and less likely to spend a fortune on transportation.

My friend isn’t that lucky and needs a personal transportation to get to work and get around. But despite that, she’s questioning whether financing her car was a wrong move.

“What have I done and how do I get out?” she cried.

You thought you’d be driving your car but your car is driving you to financial hardship.

I Dug a Deep Hole and Fell Into It

My friend was in her right for feeling devastated but she’s not the only one with that problem. I was right there with her. I know her pain very well as I made the same mistake of financing a car in 2018.

By financing my Lexus, I feel like I dug a hole and fell into it. I was young back then and didn’t know any better but I’ve grown to learn that a car is one of the worst investments I could ever make.

Cars depreciate in value the moment you drive them off the lot and they keep on depreciating for the rest of the time you own it.

And let’s not forget about the high-interest charges associated with car loans. That interest alone I’m paying on my car could buy another used car. It’s like you’re paying more for a car than it’s worth and when you finally pay it off, it’s worth even less!

It’s insane.

While having a car is arguably a necessity for most of us, it doesn’t mean we must get ourselves in a debt that’s incredibly difficult to get out of.

According to Experian Automotive, which tracks millions of car loans, the average amount borrowed by new car buyers in the fourth quarter of 2013 was $27, 430. The average monthly payment for a new car was $471 and the average monthly payment for a used car loan was $352.

I’m paying $386 a month on my used Lexus and my friend is paying $605 every single month for her brand new Dodge Challenger. Paying this amount every month can make anybody feel hopeless about being able to get out of debt.

But that's not even the worse part.

Most car loans are extended beyond six years in order to have lower monthly payments(which aren't really low.)

For her, paying $605 every month in addition to her rent and other bills for the next five years is unbearable.

And also, owning a car typically includes car payments (leases or loans), gas/petrol, insurance, and maintenance

Borrowing money to buy a property that depreciates isn't a very good idea.

I Didn’t Know What I Know Now

And neither did my friend. We didn't know what we know now.

Whether it’s a good idea to finance a car or not depends on your own financial situation. In my situation, 2018 was one of my toughest years. I couldn’t afford to buy a car out of pocket and I desperately needed one. Financing was my only option then but I should have paid attention to the fine print. I should have paid attention to how much I was financing versus the value of the car I was buying.

If I knew what I know now, I would have waited, saved up, and paid cash. I could have avoided paying such high interest. But if I paid cash then, I’d have completely drained my savings and possibly be stuck when I found myself in an emergency and that’s why I made the decision to finance my car.

While I love my car — like really, really love it — if I could go back in time, I would have saved up and paid cash for it.

Whether it’s a good idea to finance a car or not depends on your own financial situation.

I Cared About None of That

When I was at the dealership looking at cars, the last thing I was thinking about was the long-term commitment. I needed a car and that's all that mattered.

Back then, my relationship with myself and the universe wasn’t the best so even if the universe or my intuition tried to warn me against financing the car, I wouldn’t have heard the message. I was fast asleep.

Now my car loan feels like a long-term commitment and one that I can’t see the end. Like my friend, my car loan is draining my pockets and preventing me from living the life I dream of.

Until I pay off my car loan, I can’t move back home. Borrowing money to buy a property that depreciates is never a good idea.

Allowing a lender or car dealer to dictate how much you borrow will drive you into financial trouble down the road.

Put Something Down if You Go Down that Route

I didn’t make a down payment — and neither did my friend — so I financed the entire cost of the car which was $20,940 at the time. Now I owe more than my car is worth. Car dealers call this negative equity. Others call it upside-down or underwater.

My car is now worth $13,000 and I still owe $16,225. I’ve had the car for 3 years and paid $386 every month. I’ve only paid off $4,715!

This is like digging a hole in the forest and falling into it leaving the ladder behind. You can scream all you want and no one can help you because other people have also fallen into their own holes struggling to get out.

Making a down payment when you finance your car is a good idea but I didn’t know that then.

Experts recommend that if you go down the route of financing your car, you must put down a reasonable down payment, limit the term of the loan, and keep everything within your means.

A minimum of 20% down payment, a loan term of 4 years or fewer, and a total monthly payment that’s less than 10% of your income over that same period is a rule of thumb.

Keep in mind that car lending has the loosest restrictions.

Allowing a lender or car dealer to dictate how much you borrow will drive you into financial trouble down the road. Just because a lender will let you borrow $30,000 on a $20,000 car doesn't mean you should.

It’s Not the End of The World

I made some pretty bad choices, but that’s okay because it’s been a learning experience for me and I can now educate others on making better choices.

It’s not the end of the world if you have car debt you are struggling to get out of.

If you find that you are underwater — like my friend and I — meaning you owe more than your car is worth, don't trade in the car. I know it's tempting to trade it in but don't.


Because you’ll end up driving off owing more on your new car than it’s worth. It will instantly depreciate and keep on depreciating with every mile you go.

What you must do is stick with the car you have and aggressively work on paying it off.

Debts get paid off faster when you start taking it seriously.

You Must Take Getting Out Seriously

If you were to ask people how they planned to get out of debt, many would look outside of their budget and others would have wishful thinking like winning the lottery, an inheritance, or a magic windfall.

I’m guilty too.

Unfortunately, wishes don’t always come true but fortunately, we don’t have to look outside of our budget to get out of debt.

Your chances of paying off your car loan lie within your budget.

I know mine does.

If you have a car loan plus other debts, then you must budget for debt reduction. You must make monthly payments, including additional money to put towards the principal of your lowest-balance debt.

That’s how I'm getting out of the hole I dug and out of debt.

If I’m to keep making my minimum monthly payments alone, I won’t be out of the hole until 2023. I guess that’s not too bad but I really want to know what it’s like living a debt-free life NOW so I’m making more than my minimum payment.

Debts get paid off faster when you start taking it seriously. If you make more than your minimum then you stand a real chance of being debt-free sooner than later.

My current car loan will be my last car loan.

I’ll not finance another car in this lifetime. If I can't pay cash upfront or put down a healthy down payment, then I can't afford it.

This is not just car loans, I’m done with all types of loans because, in the end, you end up paying way more than you borrowed and you become stuck in a long-term commitment that can really hold you back from living the life you dream of living.

Its not worth it.

Are you driving your car or is your car driving you to financial hardship?

Ghanaian-American. Certified Life Coach. Conscious Leadership. I write about the mystical and rebel against rigid beliefs. Shhh✨

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