Why You Should Buy Cars in Cash and NOT Take out Car Loans: My Car Buying Journey & Tips


Welcome! I want to share with you my personal experience with car loans and why I believe that buying a car in cash is the best financial decision you can make. Car loans can have high interest rates, making it difficult to achieve financial freedom. In this post, I will explain why debt, especially car loan debt, is detrimental to your financial goals and how purchasing a car in cash can set you on the path to financial independence.

The Pitfalls of Car Loans:

Car loans carry high interest rates, with a minimum interest of 6%. This means that over time, you end up paying much more than the actual price of the car. I recently came across an article stating that credit card interest rates can reach a staggering 30%. These interest rates can quickly accumulate and become a burden on your finances.

Debt and Financial Freedom:

Being in debt, especially with car loans, can impede your progress towards financial goals. Debt keeps you tied to a cycle of working to pay off the loan. If you have any kind of debt, it is challenging to attain true financial freedom.

My Personal Car Journey:

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Let me share a bit about my own car journey and how I made choices that allowed me to stay debt-free. At the age of 15 or 16, I purchased my first car, a Toyota RAV4 from 1996. Coming from humble beginnings, I knew that my parents wouldn’t be able to buy me a car. I worked tirelessly, saving up $5,000 from my job at McDonald’s to purchase that car.

When it comes to cars, reliability and affordability should be key factors to consider. Toyota and Honda vehicles are known for their longevity and minimal maintenance costs. These cars are fuel-efficient and have lower insurance premiums. Older, used cars often offer better value for money, as they are more affordable to purchase and maintain compared to brand new vehicles. I drove my first car, the Toyota RAV4, throughout high school and college. Despite graduating and earning a decent salary, I resisted the temptation to upgrade to a newer car. Instead, I focused on saving and maintaining a frugal mindset. I understood that the ultimate goal was financial security and independence, not indulging in unnecessary purchases.

The Temptation to Upgrade:

By sticking to my frugal mindset and continuously saving, I was able to accumulate a significant amount of money over the years. After approximately twelve to thirteen years of driving my first car, I finally felt that it was time for an upgrade. With enough savings in hand, I walked into a car dealership and purchased my second car, not new and still used (1 year), for about $25,000. The joy of being able to pay for the car in cash and walk away entirely debt-free was invaluable. I felt proud of the sacrifices I had made over the years. It is essential to save up for the car you desire, as it allows you to feel more deserving and independent. Don’t fall into the trap of feeling entitled to a brand new car simply because you have a new job. Entitlement and ego can pave the way to financial disaster.

How to Save for a Car:

If you want to buy a car in cash, here are six steps to help you reach your goal:

  1. Create a Budget: Understand your income and expenses, and determine how much you can allocate towards saving for a car.
  2. Set a Savings Goal: Decide on the amount of money you want to save and the timeframe in which you plan to achieve it. For example, if the car you want costs $15,000 and you can save $500 per month, it will take you approximately 2 years and 6 months to reach your goal.
  3. Reduce Expenses: In order to save more money, cut back on discretionary spending and focus on what truly matters.
  4. Earn Extra Income: If your budget doesn’t allow for significant savings, consider taking on a second job or finding ways to increase your income temporarily to reach your car savings goal faster.
  5. Set Up a Separate Savings Account: Open a checking or savings account dedicated solely to your car savings. This separation will prevent you from dipping into the funds for other purposes.
  6. Automatic Savings: Make your savings contributions automatic. Arrange for a portion of your income to be directly deposited into your car savings account, ensuring that you consistently save without being tempted to spend the money elsewhere.

The Pitfalls of Car Loans:

It is crucial to reiterate the potential dangers of car loans for your financial well-being. Taking out a car loan means entering into a system where you are exploited and paying more than the vehicle’s actual cost. Additionally, missing a few payments can result in repossession, causing you to lose all the money you invested. To avoid such financial disasters, it is vital to make wise decisions when it comes to car financing.


In conclusion, car loans can be a financial burden that hinders your progress towards financial freedom. By purchasing a car in cash, you avoid the pitfalls of high-interest rates and additional expenses. Saving for a car may require discipline and sacrifice, but the freedom and peace of mind it brings are well worth it. Remember, it’s essential to buy what you can afford and not be swayed by your ego or societal pressures. Take control of your financial future and make smart decisions on your journey to financial independence.

Thank you for reading, and I hope this blog post helps you in your pursuit of debt-free driving. Don’t forget to like, subscribe, and share this article with others who might benefit from it.


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