Goodbye, Car Payments!

Got Some Battle Scars, But Will Do Just Fine!

I like watching my money grow. Long term appreciating avenues like the stock market, real estate, retirement accounts and such are places where I’m most happy to see my dollars hanging out, rather than watch them leave my bank account every month toward paying down consumer debt.

With the final chunk of balance leaving my checking account this month, I’m done with my last standing consumer debt – auto loan! I’m glad I did not take on the financial burden of owning a fancier car and stuck to the humble Toyota Corolla all these years. And I probably won’t be signing up for car payments again for a long time to come.

FIRE  (Financial Independence/Retiring Early) is an ideal that I partially subscribe to. I voraciously consume blogs like Mr Money Mustache and Mad Fientist. Linger around this literature long enough and you’ll begin downshifting on consumerism, making life choices more aligned with frugality and simplicity. While making no compromise on the quality and enjoyment of life, I’ve been generally moving in this direction over time. Reducing transportation costs is one of the areas I’m always looking to optimize.

I’d be remiss if I don’t clarify a few things, lest I risk letting this post seem like the rants of a penny-pinching cheapskate. A mid-range car isn’t really a huge dent in the pocket for folks within my demographic, which is that of a well paid software developer in the high-tech industry. With a couple of years of earnings and savings, we all can very well afford to straightaway buy out a decent new car, without ever having to take out a car loan. However, the question we fail to confront is the ‘Why’. Why would we want to spend this significant chunk of money on that shiny new car? Is it because of a genuine need for a certain kind of transportation vehicle, or is it so we can impress our friends and peers? Is it so we can partake in a social competition where the fanciness of our automobile speaks for how successful we are?

It is the latter mindset that I try not to fall trap into. This thinking can creep into most every aspect of modern life. If you give in, you’ll continue running on this hedonic treadmill, forever trying to keep up with the Joneses. Not to mention the wealth destroying repercussions of pumping more and more of your hard-earned money into depreciating consumer goods, that you could otherwise have invested toward buying your freedom from mandatory work.

I’d be honest to admit it hasn’t been easy. It takes conviction to withstand societal pressure and opt out of this social contest. It is even harder when you’re living in one of the richest communities in the world (San Francisco Bay Area) where Teslas abound and fancy cars are commonplace. Conversations very frequently turn toward cars and the accompanying assessment of one’s self-worth going by what one drives. I still don’t find myself unapologetically confident when I mention that I drive a Corolla. The fact that both my wife and I are well paid full-time earners adds to the puzzling gap between our income and certain lifestyle choices. On mentioning the fact, it is amusing although unsettling, to watch that look of condescension that appears on those conformist faces, no matter how hard they try to conceal it. This however is a valuable exercise that helps me grow and practice not to buckle under the weight of peer pressure.

I’ve only put in 60K miles on my Corolla, so I’m only nearly 1/3rd done with its shelf life. With the car fully paid off, I’ll maybe splurge a little more on some extra TLC. More frequent washes and a disciplined routine maintenance are in order so the vehicle continues to stay healthy and clean in the long run. AAA coverage will help me get through those occasional hiccups on the road, if any at all. These fringe expenses won’t come anywhere close to what I’d otherwise be paying for a needlessly expensive brand new automobile.

A fully paid off car is now one less source of drag on my wallet. The money that disappeared from my bank account the 15th of every month will henceforth find its way into the Vanguard S&P 500 mutual fund (VFIAX) where it’ll grow and compound over reinvested quarterly dividends. Goodbye, car payments and good riddance!

Related reading:
Millionaire Next Door
Cars For Smart People
Hedonistic Adaptation