In January 2009, the Wall Street Journal ran an article headlined: "The Hot New Car Is Your Old Car." It was near the bottom of the recession and car sales were hitting new lows as a wave of forced frugality swept the country. The article quoted people who were hanging on to their cars longer than usual, including Ashley Fletcher: "My portfolio lost about 40% last year, so I'm certainly in no mood to buy a new car." That was then.

Today, car sales are in high gear, helped by a stronger economy and looser lending standards. A recent Wall Street Journal article said some lenders are offering loans as long as 97 months. According to the Journal, lenders have found that if they can stretch a loan long enough to keep the monthly payment under $500, that tends to turn shoppers into buyers. As Melinda Zabritski, director of automotive credit for Experian, explained, "Consumers tend to be monthly payment buyers."

At Sound Mind Investing, we recommend a different approach. As we crunched numbers to come up with our Recommended Spending Guidelines, it quickly became clear that the best monthly payment amount for a vehicle is zero. Motoring through life without a car payment is essential for anyone who wants to save and invest wisely for future goals, give generously, and live with the peace of mind that financial margin helps provide. Here's your guide to debt-free driving.

  1. Break the cycle of financing.
    If you're currently making payments on a car or truck, determine right now that this will be the last vehicle you finance. Once your loan is paid off, keep making payments. Just send them to a savings account instead of your lender. Then keep your current vehicle as long as it takes to save enough to buy your next vehicle with cash.
  2. Buy, don't lease.
    An important key to a financial life that works is keeping recurring bills to a minimum, which is why leasing a vehicle doesn't make sense. After years of payments, you have nothing to show for your money. Far better to buy a car with cash, keep it a long time, and regularly set money aside for your next vehicle.
  3. Buy the most reliable car you can afford.
    An affordable car is one you can buy with cash, while still leaving enough money in savings for an adequate emergency fund. In most cases, opting for a quality used car is best, especially since the average price of a new car today is $31,000. A good starting point in finding a reliable car is reviewing Consumer Reports' annual "Best Vehicles for Under $20,000" report, available free.
  4. Know what a vehicle should cost before taking it for a test drive.
    Reliable sources of vehicle-value information can be found at and
  5. Consider a "certified" used car, but take a pass on the extended warranty.
    Certified cars have gone through a thorough inspection and carry a warranty. The dealer usually will try to sell you an extended warranty as well.

    My wife and I bought a certified used car about six months ago. It was two years old, had less than 15,000 miles, came with a one-year warranty, and was priced below what our research said it was worth. I was pleased with how professionally everything was handled until the very end. That's when we were "invited" into another office and presented with a very old-school pitch for an extended warranty, complete with theatrically hand-written prices that were dramatically reduced each time we refused the extended coverage. The fact that the price kept dropping suggested that there was a lot of profit margin built in for the dealer. Given the fact that the car already came with a one-year warranty, we just said no.

    Of course, if you buy a used car from a private party, which may be a good option, you won't get any certification or a warranty (extended or otherwise). So it's a good idea to arrange for a mechanic to inspect the vehicle before buying.

  6. Look into its past.
    Some dealers provide a Carfax report for free or you can pay for one yourself ( The report will tell you if the vehicle has been in an accident, or has been used as a rental. At $40, it's worth the price. Another source of information about used vehicles is the National Insurance Crime Bureau's VINcheck service ( The free report will tell you if a vehicle has been reported stolen, damaged, or deemed a total loss by an insurance company that paid a claim on it.
  7. Consider all the costs.
    The purchase price is only part of the car-buying equation. There are ongoing costs as well, such as maintenance, fuel, insurance, and more. As the table below shows, similarly priced vehicles can cost very different amounts to own. has a helpful "True Cost to Own" tool that estimates such costs for vehicles going back five model years. You can get additional fuel efficiency information at It's wise to note what type of fuel is required by the vehicle you're thinking about buying as well — costly high-octane gasoline, less-expensive regular, or even less-expensive E85 "flex fuel" (keep in mind that while E85 may cost less, it tends to reduce fuel efficiency). It's also a good idea to contact your insurance agent to get more accurate coverage estimates for the cars you're considering.

  8. Keep it maintained.
    Vehicles will typically last a long time if you take care of them. Budget for regular maintenance ($75 per month is a good ballpark figure) and spend the money to prevent more costly repairs down the road. Two websites that can help you remember when maintenance is due are and
  9. Reconsider what a car means to you.
    Our consumer culture does its best to convince us that what we own is a reflection of who we are, and it's especially easy to drink that Kool-Aid when it comes to our cars. For some people, loosening their emotional connection to a car may be the most difficult — and most helpful — step of all.

    Of course, there are no moral prohibitions against driving a car with leather seats, temperature controlled cup holders, and a Bluetooth connection for your wireless juicer. But it's worth considering whether your car-buying habits are getting in the way of other goals that may be more important, such as saving for your later years or your kids' college expenses. Mile for mile, you're likely to get more satisfaction from a life of financial balance than from a car that can parallel park itself.