Painless Guides to Paying Off Your Car

This post is sponsored by Kia.

The Megan Method — Overpay, Then Sell

My first car was a wonderful, amazing, dark green faux-wood-interior-paneled convertible. I bought it outright from a lady in the neighborhood, and I used all my savings — $5,000.

When that car broke down, I bought another car, this one from my “car guy.” I traded my car in to him and financed the rest — $4,000.

I got a loan through the credit union, and overpaid each month so that I could pay it off early and avoid some interest. But now I need to replace my brakes and my air conditioner — to the tune of $2,200, which I will not be doing. I’ll sell it as-is and pay off the remainder of the loan and start over. Not with a used European car. Never again with a used European car.

The Logan Method — You pay for your car once and your parents also pay for the same car once

The first car I bought when I moved from Virginia to L.A. was one that had a tendency to break down at inopportune times. My parents were my Google, and so after a few 2 a.m. phone calls asking if they could please look up the number of a tow place thanks so much, they said: We will help you buy a new car, but only if you buy an actual New Car and also promise to never call us again.

My dad flew to California and we researched cars, and they put $10,000 as a down payment on a new hatchback. The remaining $12,000 was mine to pay off — I got a loan through a credit union and then had $239 deducted from my checking account automatically each month.

Two years later I extended the pay-off date to bring my payments down to $150, and then a year after that, I refinanced the car to pay off some credit card debt, essentially selling the car back to the credit union and then repurchasing it with a new loan.

When I moved to New York, I left the car with my parents but still made the payments since it was my cross to bear. Eventually my parents paid off the $10,000 lien on the hatchback, which means they paid for half the car twice and I paid for half the car twice meaning together we paid for the whole car twice, but let’s not think about that and instead decide that all is well that ends well.

The Lauren Method — Be Unlucky, Then Lucky And Also Perhaps a Little Bit Dishonest

I took out a $3,500 “loan” from my parents and bought my first car for sale by owner. I had paid back about $1,000 of it when I backed into a parked car, making a huge dent in the back. It was ugly but still driveable.

Then I got slammed by a college maintenance truck on my way to class one day. The college gave me massive check based on damage they assessed that may or may not have included the original dent.

I paid off the rest of car with this check.

My dad fixed the dent shortly thereafter with a crafty as-seen-on-TV dent-popper-outer.

The William Method — Buy With Cash

Over the last 12 years I’ve owned three specimens of the same model of car, one from 1980, one from ’82, and one from ’83. I bought the first one via a classified ad in the Washington Post, way back when Craigslist existed only in San Francisco. I found the ’81 and the ’83 on the Philadelphia and Portland Craigslists, respectively. My current car, the ’83, was the most expensive one at $3,800. I paid cash each time, but only after taking the car to a mechanic for a pre-purchase inspection, which, if you’re looking for tips, is My Tip. Never don’t do that.

The Alec Method — Get it Done

I bought my first car with savings and help from for my parents and never had a car loan. I liked not having a car loan. When it was time to buy a new car, I didn’t have the cash to not have a car loan at all, but I knew I wanted one for as little as possible. So I put 20 percent down, and then made my monthly payments the max that my budget could make room for. I wince each month, but it will be over in a year.

The Lisa Method — Be Clever Enough to Get a Good Interest Rate on Your Car Loan

I just bought my first car in December. Prior to that I was leasing a car (and prior to that I had just inherited paid-off cars from my parents). When I went looking for my next car at the end of last year (because I knew my lease was ending soon), I thought I would just start another lease. I know this is stupid because people told me it’s stupid, but I still don’t completely understand or internalize the stupidity of leasing. The way I see it, I can’t afford to buy a car in cash, so leasing a car is a cheaper way to allow me to transport myself automotively. I can’t buy a house now, so I rent an apartment. I understand that leasing is just throwing money into a pit and then once it’s over all that money is gone and I have nothing to show for it, but isn’t an apartment the same way? I mean, when you lease a car, it has a warranty that lasts the extent of the lease and all of the services are taken care of — the same way all the repairs to a rented apartment are taken care of. Isn’t that great?! I thought so. Anyway! My last car cost me about $219 a month.

When I went car shopping at the end of 2012, I realized I could spend a little more so I looked into some more expensive cars, specifically hatchbacks (Why? Who knows? Just a random decision to help me narrow my search). I test-drove a new model, and I think the lease on that would have been around $275/month which sounded do-able, but then — THEN — I (again, for reasons beyond my memory or explanation) test-drove an older version and liked it so much more than the newer model. Leasing isn’t available for used cars (I’m sorry — “pre-owned” — let’s be PC about it), so I went down the purchasing route.

I went back and forth negotiating with a few dealerships. When I was looking for a new car I used CarWoo, a site where you can list what you want and then have dealerships give you bids on what they can offer (the LendingTree of car shopping, I guess). I would neither recommend nor not recommend CarWoo. It’s fine. I’m sure it’s helpful for a lot of people. For me, it was helpful in getting me in touch with dealers in the area VIA EMAIL (which for me, was very important because I don’t have time, nor do I like talking on the phone). So I landed with one dealership who had a few of the car I was looking for — one in the color I wanted — and we eventually landed on a fair price which I am paying monthly through Wells Fargo!

Here’s the story on that:

I researched a fair interest rate and then asked for less! I went to my bank, which offered 2.9 percent. In the final in-person financing talk at the dealership they offered 2.6 percent. I then told them that my bank offered 2.2 percent (LIES!), and they found a bank to match that. WHAAAAAAA?!

I got sucked into an extended warranty situation (which I’m actually glad that I did since my right speaker went out a couple weeks ago and would have been a ton of money to repair if it wasn’t covered), and so now I pay a whopping $329/month for the next five years, and then — THEN — I will own the heck out of that car. I’m happy and proud of that. 🙂

Things to think about before opening up your wallet:

Cars are expensive. If you need a car, but can’t buy it in cash, that means you’re going to have to finance it. So: Think more about what kind of car you need, and less about what kind of car you want. Don’t buy more than what you need, and you’ll keep the cost down and pay off your car faster.

New or used? New cars are pretty and shiny, are reliable, and if anything goes wrong, the warranty should take care of it. New models can also be a lot more fuel-efficient and fitted with the latest, modern safety features. They’re also very expensive, and since cars are depreciating assets, they quickly lose value. You can get a lot of bang for your bucks with a pre-owned car. You can find a used model of the car you like for significantly less than the cost of a new one. But: They’re not outfitted with the latest safety features, and your mileage literally varies — some previous owners take better care of their cars than others, and some used cars quickly become lemons. Consider what you can afford, what features you’re looking for, and what you’re comfortable with. If you don’t have much cash to work with, and don’t care about having the latest features, go used, and do your research to find a reliable one.

So you’ve decided to finance. Some tips.
– Ask about zero-percent financing, which can save you a ton of money over the course of a car loan, and is usually reserved for buyers with excellent credit. Yes, this is where having a good credit score comes in handy. Just make sure the monthly payments are still manageable.

– Ask about “cash back” offers, which essentially means a price reduction off of the retail price. Your salesperson should be able to lay out for you available offers, like rebates or other dealer incentives, and then walk you through which offer is best for you (but do your own calculations too, just in case).

– The most important thing to do when financing is to read the fine print. You don’t want to agree to anything you’re not comfortable with.

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