Jonathan Chevreau asked his readers whether he should keep his old car running or buying a new one, and the reader response was solidly in favour of keeping the old car. I tend to agree that it makes sense to keep a car as long as possible. However, the day must come when we have to let go and replace our cars. The question then is how to pay for the new car.
I think the answer is preparation. If you’ve got a good old car that is running well and not costing you too much money to keep in working order, then you should be able to save a couple of hundred dollars each month toward a new car. If you can’t afford to do this, then you really can’t afford your car.
The best way to pay for a car is in cash. For one thing, you’ll think twice about buying an expensive car if you’ve had to save up the money. When you do buy your car, you can immediately start saving for the next car. This will save thousands in interest payments.
For the majority of people who have fallen off this particular wagon, having an old car with no payments left on it gives them the opportunity to put the amount of the payments into a savings account that will later reduce the debt on the next car. For many people I’ve known, the single best thing they could do for their finances is get their car spending under control.