As an Orlando bankruptcy attorney ,all too often I meet with clients who have rolled over old car loans into new car purchases so many times that by the time they are sitting in front of me they owe 2 or 3 times as much on the car than the car is worth.
Car dealers make it easy to do, no doubt, and once you get stuck in the trap, it’s very hard to get out.
The answer…don’t fall into the trap in the first place.
Buy your car with cash. Sound impossible? It’s not, here’s how to do it:
First some obvious benefits of buying a car with cash are:
- No financing costs
- No required monthly payments
- Not buying a car you cannot afford
- Not owing more than the car is worth
5 Steps to Work toward buying your next car using only cash: (So you won’t need an Orlando bankruptcy attorney)
- Keep your old car as long as you can unless it is costing you more money to run/maintain than what you can afford to put into it. Keep it maintained in good condition…don;t put off the oil changes and regular maintenance.
- Pay off your old car as soon as possible, put extra money toward paying off this debt.
- Once your car is paid off, make your monthly car payment to a savings account. Pay an amount equal to or more than your former monthly car payment.
- Drive your old car as long as you can. When it is as old as it can be and isn’t useful any more, sell it and use the amount you get (if anything) and your savings to buy a good, reliable used car. If you need to take out a small loan to do this, it’s ok — just make sure the loan is substantially less than the loan you had on your last car.
- Repeat these steps until you can pay cash for a new car. You should be able to make a good deal of progress on each car you buy, the debt for every new one should be less and less until it completely disappears.
The key is discipline. You must have the discipline to make a payment to your savings account in lieu of a car payment each month. You must also have the discipline to not get caught up in wants vs. needs. You must not be tempted to buy a new car when your old one is working just fine!