How to Budget Part IV: Is a Car Payment a Necessary Evil?

car payment1 How to Budget Part IV:  Is a Car Payment a Necessary Evil?**If you missed the first posts in the How to Budget to Live within your Means Series – you can catch up here:

No, a car is not in most lists about basic human needs.   However, I think it would be unrealistic to guide you to develop a basic budget that doesn’t include a car.

Yes, people can manage without cars.  I see them waiting for the bus every day.   If push came to shove, you could walk or ride your bike – and in a large city with good public transportation, a car is not a necessity.  However, American culture has developed around reliance on a car, and most of us (those living in the suburbs or rural areas) need a car to go about our daily lives.

We have to get to work, yet be able to pick our children up from school if they are sick.  We need to be able to take our kids to the doctor and to haul groceries home – basically a car is necessary.   However, that does not mean a car payment is necessary.

Car Payment

I know plenty of people that advocate differently.  They are certain that a car payment is a necessity – a necessary evil maybe, but something that is a given and out of their control.   One woman I know is paying over $500 a month toward a car payment, but has already told her kids not to expect any help with college because she can’t afford it.   She also buys a new car every few years, so the payment never ends it just transfers to a different vehicle.  There are plenty of people like this, you might even be one of them.   But here’s a reality check – you don’t have to have a car payment – you are choosing to have one.  There is a difference.

A used car will get you to work, will take your kids to the doctor, will haul groceries – and will cost you a lot less.

Used Car

Perhaps you think you wouldn’t be caught dead in a vehicle that you could afford to pay cash for.  If that’s the case, then consider this – your pride may need to step out of your budget if you want to stay out of debt.
There are GREAT cars available for very little money.   Cars with a lot of life left in them, that look sharp, are reliable and will get the job done.  Want to see for yourself?   Look on Craigslist for a car and limit your price to a max of $5,000 – scan the results for a relatively newer year and around 100K miles or less. I just did and here are three that I found – each progressively newer and progressively less expensive:

With $500 a month, it would only take 6 months to save enough to purchase any one of the four cars I found on Craigslist.  After that perhaps you budget $200 a month for repairs (which would be a ton of repairs and highly unlikely).  You would still have an extra $300 a month in your pocket.

Ultimately, choosing to have a car payment is about your pride – not your needs.   If you have money left over after calculating your needs, then maybe you can choose to put extra into buying that used car (or paying cash for a new car) – but if you want to be in control of your finances it is critical that you understand and accept that a car payment is not a need but a want.


Track your expenses for at least a month to determine how much you are spending on gas.   If you pay with a credit card – which most of us do for convenience at the pump – then look at your online statements and average how much you spend per pay period on gas.


Car insurance is much like healthcare – you need it.  Therefore, determine how much you are spending and add it in your budget.  If you are looking to reduce this cost, then consider buying a different vehicle (different cars/trucks have different ratings based on accident statistics and average repair costs).  Also, price check your insurance with other carriers annually and evaluate your deductible and coverage limits to determine if they are still the right coverage choices for you.

Parking Fees, Tolls, Bus Pass, Car Maintenance

Estimate these to the best of your ability and make sure to add them in to your budget.  Consider carpooling to reduce costs if it makes sense in your situation.

**When I lived in New York I didn’t have a car, but I did have subway fees.  If you live in a major city, then I would substitute your subway fees/bus pass cost in place of a car expense in your budget.

How much is your car payment?  What would you do with that money if didn’t have a car payment?

**Stay tuned tomorrow for How to Budget for a House.

2 Responses to How to Budget Part IV: Is a Car Payment a Necessary Evil?

  1. My dad taught my sisters and me to keep making car payments even after the loan is paid off. Put the payments in an interest-bearing account and use that the next time we buy a car.

    As you say, if you buy a car every few years you won’t get ahead with this. But if you replace a car at 10 years or so, you could conceivably pay for it with your savings.

    Good things to think about here!
    Lori Lavender Luz recently posted..Winter, Spring, Summer or FallMy Profile

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