Why I Paid Off My Car Loan 32 Months Early
I don’t have a car note anymore FINALLY!!!! I’ve been waiting for this day for over 2 years now. I still remember the day when I first purchased my Challenger like it was yesterday. I just turned 24 and I drove off that Dodge dealership’s lot feeling like a boss in my new whip. Can’t lie it felt really good to post pics on Instagram and Facebook flashing my ride.
Isn’t that the cool millennial thing to do? I mean everyone does it nowadays why not me? Boyyyy was I wrong. Financing 26k over 75 months for a car while living with my mom was not the smartest decision I could’ve made lol. At the time I felt so entitled to a new whip. I mean, I was debt free and making around 55k with hardly any expenses, I felt like I “deserved” it for my hard work.
If only I had read more about money then and educated myself on how to build wealth. Being young and debt free with a paid off car, I had the best opportunity to get a jump start on my financial future. At 24, I could’ve contributed more to my 401k, saved for a fully funded emergency fund while maxing out my Roth IRA. All accounts would have appreciated over time. Instead, I bought a depreciating asset. Every month I put money into something that was decreasing by the day. My Challenger is currently worth a bit over 18k as of now in the private market. If I would’ve put those same payments I was making on my car into appreciating assets, I can only imagine how much my net worth would be right now. I could’ve easily saved 20% for a down payment on a home, or a year’s worth of expenses for emergencies, or just enough to buy a used Challenger that’s 2-3 years old at a cheaper price or maybe saved enough to create a start-up business.
I don’t have any regrets because buying this car triggered me to educate myself about personal finance. I learned so much in just over 3 years. Prior to this purchase, I became a victim to conspicuous consumption. Constantly buying things to show off and impress other people. I really sat down and told myself, “why am I buying all of this shit”. It’s not getting me anywhere in life. I hated the fact I had to make a payment to a bank the 7th of every month for something decreasing in value every day. With real state at least you can write off the interest and property taxes and homes appreciate over time. With auto loans, you can’t write any of that off (unless it’s for your business of course). I was sick and tired of owing somebody so I made a change. I started to budget, then made a few sacrifices in my spending habits and attacked that car note like it said something about my mama.
You can only cut back so much though. What really accelerated me to pay off this car loan faster was earning more income. The pay raises I’ve gotten over the past few years were extremely crucial in this debt destroying process. I didn’t even inflate my lifestyle with each pay raise also. I took it as an opportunity to increase my net worth by reducing my liabilities. This journey was not easy at all. At times I contemplated selling my car and I even tried refinancing it, but I only got approved for an Apr that was 0.75% lower than the original 7% loan. It was not worth it so I just told myself, “if you can get into debt, you can get out of it”. I changed my mentality and stopped looking at the amount and focused on my habits. I set mini goals like I want it down to 20k by Dec, 15k by summer etc… Additionally, I canceled my overpriced extended warranty and got a prorated refund of $782 back that went straight to the principal of my car loan. Then the momentum just kept rolling and today I am truly happy I don’t have to make another car payment!!! Now that I don’t have a payment I can really start to build up my net worth. If I can pay off a 26k car loan in 3 and 1/2 years that means I’m capable of saving that same amount over the next 3 and 1/2 years.
I saved about $2,700 in interest payments by paying off my car note 32 months earlier than expected. On average I added an extra $265 per month to my $435 car note. Paying off my car early not only feels amazing, it also gives me an opportunity to save without any debt and more importantly a peace of mind.
I can’t tell people what they should and shouldn’t buy I mean it’s your life, but my only advice to younger people is to just pay yourself first!!! You are worth more than any product on this earth.