How We Got Into Debt: Our Car Loan

by Khaleef "Fat Guy" Crumbley on August 22, 2013

in Debt Repayment

Okay, so you may remember a few weeks ago that I talked about all of the debt that we had at the beginning of this year. One of the things I listed was a car loan. Now, you may remember that a few months ago I wrote about paying off our car loan and then even asked if you felt that we should try to purchase a new car (having to take out another loan) because of all the mechanical problems that we were having or continue to pour money into the “potential” repairs.

The first time I ever took out a car loan was in 1998. At that time I had already owned three vehicles that were either given to me or were purchased for less than $1500. Because of the insane amount of driving that I did back then (over 40,000 miles a year), none of them lasted for more than a year. It was at that time that I decided that the best thing to do was to purchase a new car and take out a loan. Once I paid off that loan (I was not married at the time), I told myself that I wanted to be in a position to never have to take out a car loan again – my goal was to only purchased used cars.

Car Loan

However, after nine years and almost 200k miles (my wife and I were married by this time), the car began to need a lot of expensive repairs, and we eventually had to replace it. Unfortunately, we didn’t have enough money saved to buy an adequate used car, and we were not in the position to drop down to one vehicle.

We decided to purchase my current vehicle (the Impala that I’ve written about many times before) at the end of 2007, but because of a number of financial obligations that we already had, we decided to take out a 6-year loan. This brought the payments down to $161/month, which was important at the time because of the tight position that we were in at the time, and the fact that we still needed a reliable used car.

As with my Cavalier (the car I had for over 9 years) we said that we wanted to keep the Impala for as long as possible while we dig ourselves out of massive debt. A couple of years ago when my wife’s car died after 19 years on the road, God blessed us by having her parents give us a car (since they were moving out of the state) about a month after the old one died! This allowed us to avoid having to purchase another vehicle years before we were ready.

Unfortunately, we are in that position again now, but that will be the topic of another article (this is just about how we got into debt).

So, in the case of our car loan, we tried to explore other options to avoid this debt, but the combination of debt and our living situation caused us to have to go this route. We are hoping to be able to find another solution for our current situation – which we will be writing about in detail to see if you all come up with any suggestions.

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WalletEngineers August 22, 2013 at 1:46 pm

I understand there are often circumstances which require people to buy new cars but with the amount of reliable used cars out there these days I find it almost silly to buy something that loses 10+% of its value in 24 hours. Being able to sit down a write a personnel check for my 2005 Toyota Prius with 75k miles on it 2 weeks ago was one of the happiest moments of my young life.

Thanks for the post, good info here!

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:24 pm

I agree with you on that. That’s why we looked for a used car that was still fairly new. Unfortunately, we ran into a lot of mechanical problems, but that still hasn’t pushed me to look for a brand new car in the future.

Congratulations on being able to pay cash for what sounds like a great car!

maria@moneyprinciple August 22, 2013 at 3:38 pm

Sorry you had to go in debt for this but it is abvious you need cars. Just focus on paying off the debt and builing a serious ‘dam’ so that next car you can buy for cash :).

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:25 pm

Thanks, Maria! We definitely want to build up our cash reserves, even while paying off debt. It’s not easy, but it will be worth it.

SuburbanFInance August 22, 2013 at 11:33 pm

I took out a car loan last year to buy a car because I needed one. I paid it off 18 months later. It worked out just fine , but then my interest rate was fairly low.

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:32 pm

If we have to take out a loan, that is the way we want to do it. Great job on paying it off early.

Michelle August 24, 2013 at 10:54 pm

At the end of the day you have to access your personal situation and make the hard choices. You live in an area where you have to have a car. What else can you do? I don’t own a car, but I’m very fortunate that I live in city with great public transit and I am given a bus pass…from my work. One of the reasons that I continue to live where I live is access to transit. It has to be super frustrating to not have that option. Have you ever considered doing a car share? I have friends who do it and they LOVE it!

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:36 pm

When I lived in Newark, it was no problem for me to not have a car; but out here you can’t function without one. I’m not sure I know what a car share is…

Michelle September 6, 2013 at 9:51 pm

Hey Khaleef, here is a link to a car share program. They are in New Jersey too!

Anton Ivanov August 26, 2013 at 8:13 pm

It’s unfortunate that you had to take out another car loan, but life doesn’t exactly work out the way we want to every time. At least you realize that it’s not the best thing to do financially – most people think you can’t buy a car any other way!

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:38 pm

Yeah, we are really hoping to avoid a loan this time. Trying to hold out as long as we can to save up. I definitely know people who think it’s normal to borrow money to buy a car (or even just furniture)!

Kyle Howard August 27, 2013 at 10:33 pm

It sounds like you aren’t going into debt on cars just because you want to have the fancy, shiny new thing. Rather, it seems like you really have no choice but to upgrade to something more reliable. Too often we criticize others for getting into debt without knowing how hard they tried to avoid it.

This year I have been working to pay off a property tax debt and those payments really hurt the bank account. I guess the key is to just keep thinking how nice it will be when it is paid off.

Khaleef "Fat Guy" Crumbley September 6, 2013 at 8:39 pm

That is a very good point. We can’t just criticize others for being in debt without knowing the reason behind it.

Oh man, tax debt of any kind has to be frustrating! You’re right regarding the end result being our motivation! 🙂

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