Never have another car loan
Okay now that I’ve talked about why buying a car with a loan is a bad idea, its time to offer a practical solution that will allow you to get off the cycle of always buying your car with borrowed money. The way to do it is quite simple really, it just requires disclipine.
Step 0:
Buy, don’t lease. Leasing is only a good deal if you are getting a new car every 2-3 years, but getting a new car that often is expensive and stupid. If you have that much money to piss away every year then you don’t need to read this blog 
If you currently are leasing your car, either buy it out at the end of the lease payment, or buy a different car when your lease is up. But in any event do not lease, buy!
Step 1:
Drive your current car into the ground. If you own your current car then take good care of it, make sure to get it all scheduled maintence, and change the oil as recommended by the owners manual. Take good care of it, own and drive it well past the end of its loan. A modern car should easily last you at least 10 years, at some point it’s not worth the trouble to own anymore, but a car will last a long time if well cared for. If you are in the habit of buying or leasing a new car every 2 or 3 years get out of that habit right now! This habit is costing you between 5 and 10 thousand dollars a year, in essence you are probably working 2-3 months a year just to pay the freight on your car. Our oldest car is now 9 1/2 years old and going strong, I’m going to try to make it last another 5.
Step 2:
Okay so now you have a car that you own, you are either still making payments on it or not, depending on how long you owned it. In any case when the loan is payed off you must still make car payments, but this time instead of making them to someone else you make them to yourself. Take that car payment that you would have made on your loan and put that same amount in your savings account each month. Once that amount reaches 1-3 thousand dollars set up a separate short term savings account for it to get a better rate of return (More on how to do this later). If your car is paid off and you are not making payments, congats, but it’s time to start making payments again, go look up what your old car payments were and start making them to your savings account. If you don’t do it now you’ll have to do it next time you buy a car, and I guarentee you that you’ll be paying more than your old payments next time you buy a car if you don’t start saving now. If your budget won’t support a car payment and you don’t have the savings to buy your car with cash you are in financial trouble.
Step 3 - Buying a new car:
If your current car has not died then do not buy a new one until your can pay for it out of the cash reserve you are building up with your car payments. If your car did die then it would be best to buy a car for the amount in your account, a 2 year old used car may get you to within your budget. If this is not possible then go ahead and finance the car, but do the following. First determine the payment for 100% financing, say $500/month. Then take out the loan, but use your cash reserve as a down payment, your new payment will be significantly less say $300/month. Write a check for $500/month on the loan. This will pay off the loan much more quickly and reduce your interest costs, once the loan is paid off put that $500/month into your car savings account. If you can’t afford this $500 payment then buy a cheaper car! Never stretch your car payments to the edge of your ability to pay. That’s a recipe for disaster, always live below your means.
This way of purchasing cars requires discipline, but if you stick to it you will never have to borrow money to buy a car again, eventually you can reduce the amount you are putting into your car purchase account depending on how long you can make your cars last. The interest in that car account goes to you so intead of paying interest on your car your car account will be earning interest for you! This is an example of how once you get ahead of the game life gets easier. It hurts to get there, but once you do things get so much easier.