What’s Your Best Get Out of Debt Mobile?

When most people hear the term, “silent killer”, they think about cancer or carbon monoxide poisoning. I think about car debt.

It seems like everyone is comfortable with a car loan these days. They give reasons like:

  • “I need to have a dependable car to hold onto my job”
  • “One of our cars is fully paid for, so it’s okay to have a loan on the other one”
  • “My car gives me confidence when I drive into work each day. Having a nice car improves my performance and my ability to get promoted.”

In reality, they’re all saying the same thing. And it’s:

  • “I’m insecure about myself and I’d rather go into debt for my car than buy a piece of crap that I’m going to get laughed at for.”

The Curse of the Car Loan

We actually touched a little bit on this yesterday (“What is Your Net Worth, and Which Way is it Moving?“). Cars go down in value so fast that it’s actually hard to save money faster than they depreciate. I call it a silent killer because you don’t actually see the money flying off your car. It’s done silently and unassumingly, but it definitely happens. And if you own a $40,000 car, it happens at about the rate of $6,000 per year.

Just think. Your net worth is $20,000 today and you drive a $40,000 car (the whole things is on a loan). If you save up zero dollars between now and next year, your net worth will actually tumble to $14,000. This is the effect of the silent killer, and it’s why I still drive vehicles that cost $5,000 or less. They still look decent, they’re almost fully depreciated, and my net worth will continue to soar.

Get Over Yourself

Let’s get over this major myth about a $5,000 car leaving you by the side of the road everywhere you go. Just because a car costs only $5,000 does NOT mean it’s a piece of crap.

When I was getting myself out of debt a few years ago, I sold my expensive-to-fix Nissan Altima and bought a cheap $2,500 Honda Civic with 191,000 miles. To this day it has been the absolute best car that I’ve ever owned. I put 40,000 miles on it, got an average of 37 miles per gallon, and only had two minor repair issues over the course of 3 years (none of which left me by the side of the road). It was simply fantastic.

If you want to get out of debt and actually grow your net worth for a change, you’ll have to get over yourself and downgrade your ride. I strongly suggest it to everyone I meet.

What’s the Best Car for You to Get Out of Debt?

I get asked this question a lot. When people finally come around to getting rid of their expensive car, they ask for my advice on what their get out of debt mobile should be. What is inexpensive, but will still be dependable for them on a day to day basis? As the son of a car dealer, the answer comes pretty easily to me. And in fact, I decided to diagram it for you.

Check it out.

best car to get out of debt

Do you need to haul kids around?

Then I suggest a Honda or Toyota minivan (and if you can’t afford them…then the lesser expensive, but less reliable, Dodge Grand Caravan). Don’t want a minivan? Tough. Suburbans and Yukons are too expensive for you. The minivan is practical, dependable, and cheap. It’s definitely your next get out of debt mobile.

Are you in the market for a truck?

There are some great options that don’t cost $30,000 out there on the used market. My first picks would be a Chevy S10 or a Ford Ranger. They’re small so they get good gas mileage, and they’re fairly dependable – and if they do break down they’re actually pretty cheap to fix! Need a full size truck? I recommend the GMC Sierra. To be honest with you, it’s going to be tough to find one without rust (they’re known for it around the wheel wells and underneath the cab), but the motors will run forever.

Don’t need a truck or van?

Then it’s time for you to get some awesome gas mileage in the Honda Civic (I obviously recommend it). Think it’s too small for you? Well….I’m 6’8″ and it fit me fine, so I don’t think you’ve got an excuse. If you can’t find a decent Civic, then take a look at a Buick Park Avenue or Toyota Camry. They’re awesome runners as well.

Your Get Out of Debt Mobile – It’s Only Temporary

I know I know. Driving a $5,000 (or less) car won’t necessarily be the time of your life, but it’s only temporary. If you buckle down and tackle your debt, you can likely get rid of all of it (outside of your home mortgage) within just two years. Out of your 100 year life, that’s just a drop in the bucket. And then after the debt is gone, you can upgrade a bit if you want – maybe to a $10,000 car.

Ten years later, once you’re a millionaire (you’ll be surprised how quickly it can happen when you have no debt), you can buy whatever car you want. You’ve lived like no one else, so now you can live like no one else.

Are you driving your get out of debt mobile? If not, will you soon? Which one?

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8 comments to What’s Your Best Get Out of Debt Mobile?

  • whiskey

    I get new car fever ever so often. Then I look at the sticker $$. Holee molee…
    Nope nope and uh no! That ends the fever. Even most used cars are getting stoopid expensive. 200k miles and looks like Oscar the grouch lives in it, and still want 13k, ha! No thx..
    I stick with the 10% rule. 10% of your net income 50k = 5k car… It hasn’t failed me yet. Yes my trucks are a bit worn. But so far there’s nothing I haven’t’ been able to fix easily and its still cheaper than having debt hanging over your head for a stupid chunk of plastic and metal. Looking at my little Dakota I have, I will need to spend about $1000 over the next year. Big freaking deal. Once again, better than some large sinking debt that you knew better than to get into.
    Also, have CASH in hand to buy. $$ talks – period!. When I buy, ie car =3500 + ttl. Ill offer 3000 w/ttl cash. And am not afraid to walk away. There’s always another seller, another car… 9 out of 10 times they’ll sell it. Use all the tricks in the books too, especially if dealing with dealerships big or small.
    Good article.

  • Love this article….I think cars and going out to eat are your biggest culprits in living with debt. I am coordinating an Dave Ramsey FPU class right now and all of the participants drive a better car than me (most are new)… one even has a new Lexus SUV! I have a net worth in the $2.5 – 3 million range and could easily and justifiably afford a new car. My newest car in my aging fleet of five is a 2005….we are never on the side of the road and get great gas mileage on 2 (because we commute). I must express that 3 are Hondas, 1 Toyota truck, and 1 VW beetle (which I would never buy again). All have at least 200,000 miles and we hang on to them for various reasons. The insurance we carry is only for liability. If we have a wreck and it is my fault, on well, so much for that loss….not a big one. Fortunately, we both are good drivers and “self-insure” for collision. It saves a fortune. I have no need to impress anyone…what would really impress people would be my wealth building via interest income each year by not paying car notes! I take pride in driving an older car and understand the power of how much money this has given to our family over the years. I would rather continue to build wealth for my retirement and leave a legacy for my family than throw money out the window with thinking I am more secure with a new car. I find that even when I purchase a used car, it still feels like a new one to me! One of my sons wants to drive one that is about to get the “antique car” license plate in a couple of years….no buying a car for him!

    • Very cool JL. Liz and I drive a $6,500 van and a $4,000 car. Both of which have over 100,000 miles. They’re not expensive, but they are pretty nice! I think we’ll upgrade one day – maybe when we hit $1M net worth. But I can’t see driving anything that’s worth more than $15,000.

  • I bought a 2014 VW Jetta from Enterprise for $13k last year. It only had 35k miles on it. Originally, I put $5k down and took a loan for $8k. When I realized how stupid this was (and when I realized I could pay it off completely) I paid it off 4 months after the purchase.

    I’m going to drive this thing into the ground. In addition, I only drive about 4k miles a year… yet my insurance is $600 for 6 months 🙁

    Things to optimize and work on I guess!
    Erik @ The Mastermind Within recently posted..My Money Story

  • Bruce

    Wow, two responses to Derek within a week! Derek, as you know, my wife and I have done well financially, and one reason is that we didn’t go wild on cars! While we have purchased new (for the most part), we have kept these vehicles for 12+ years. Right now, I am driving a really cool 2005 Odyssey… have 195,000 miles on it, engine is good, and it gets me from point A to B. Back in the 1990’s, I worked in Texas, driving a ~10 year old car without aircon. I received a large raise, and my boss told me to go out and buy a new car. Didn’t do it. At the time, we had a young daughter and knew that we wanted a second kid. In my mind, the college fund was more important– keep thinking long term!

    • Keep the comments coming, Bruce! You know I love to hear from you!

      I just gave a talk around three points: 1) Getting out of debt, 2) Reducing your expenses, and 3) Investing for the future. For the first two points I found myself talking about cars…a lot. The more car you buy, the harder it is to improve your net worth because the stinking thing just keeps going down in value!

      Hopefully they were able to learn some other stuff from my talk, but at least they’ll know not to overbuy when it comes to their cars!

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