I recently paid off both my cars. Yes – it’s true. If someone were to ask me years ago about paying off my car, I would have responded, “Why? There’s no point. I’ll just buy a new one.”
Today, I live life with no monthly car payments. And, it’s a feeling a wish everyone could experience.
Send 5% or more each month
Since car payments are installment loans, a minimum payment is required. Even though I had a fixed interest rate over 72 months, I didn’t want to pay on a car for six years.
So I began sending a little extra each month, 5% to be exact. It’s not much on a $300 monthly payment, about $15. But multiple it over six years and it’s an additional $1,080 or four months knocked off the term of the loan.
Apply a percentage of your tax returns
If you receive a tax return each year, apply all of it or certain percentage to your car loan.
I had to fight the urge of buying one of my favorite cars, an Audi A8 with the money my wife and I received from our tax returns each year.
I don’t know what it is, but a new car smell, sleek exterior body and inscribed Audi car mats make me want to get in car debt all over again.
Fortunately, my wife reminded me of the bondage car debt is, and so, we applied two years of tax returns toward our car loans. This accelerated our payoff an entire year.
Before I met my wife, I was a refinancing machine. I bought and refinanced several cars, each time, rolling over the negative equity into each new car purchase.
As a result of refinancing, my monthly car payments decreased but the length of time to pay the car loans increased.
Once I stopped refinancing, I locked into a low interest rate and applied each of the steps above, not on one but two cars.
Paying off a car is an awesome feeling. Owing money to no one is even a greater feeling.
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