Keep Paying Car Loan Even When Done

Some of the best advice I have heard lately is to keep paying your car loan even when you don’t have one. Sounds kind of silly doesn’t it, but it is really a great idea. You can keep paying on a car loan that doesn’t exist, into your own bank account – and thus giving yourself a nice little nest egg.

Let’s say your car loan is for $300 a month. You spend three or four, maybe even five years paying that auto loan off. Then at the end of the term, you now own that car, but have an additional $300 a month to spend.

Now, if you have credit card debt or something like that, obviously you should use that money to pay off that debt. But if you don’t, open a savings account and put that $300 into the account every month just as if you were paying your car loan.

In just one year, you will have saved $3,600. In two years, you will have $7,200, and so on. This means that if you need another car you will have money to put toward it! Either way, you will have a nice nest egg growing for whatever comes your way – repairs, another car, etc.

You are already spending the money now, what difference does it make to keep putting that away for you? Analysts say that most cars will last somewhere around ten to fifteen years if treated properly. That means, you could have saved somewhere between $36,000 and $54,000 by the time you need a new car. Not too shabby huh?



Back to March 2008 Archives