Buying a car is a big purchase. There should be a lot that goes into what you want in a car, including price. Tara and I have bought 4 cars in the 4 years we’ve been married and would like to share our experiences of when we bought our cars with cash vs. when we bought our cars on credit.

Cars we bought on credit

While we were dating, I bought my first car on credit, a Mazda 6. This was the worst experience I’ve had buying a car, mainly due to the crappy salesman I had to deal with. I didn’t have any experience buying a car and so the salesman took advantage of that, promising me a certain payment, only to call me back the day after I had the car needing more money down and a different payment amount. The loan I had taken out was around $7,000 so my payment was relatively small ($120), but I didn’t realize how much that small payment would hinder my wealth building in the long-term.

About a year later, we got in a wreck and realized that we barely had any equity in the car. The insurance paid off the loan, but we were left with only $1,000 to buy another car. We felt we didn’t have other options so we decided to get another car on credit. This car was cheaper ($4,000) and the payment was only $100 a month. This car seemed to be a really great deal at the time, but it ended up having quite a few problems. The A/C died on us and the brake pads quickly went out. We also had some suspension issues that would have cost us around $1,000 (had we fixed it).

Car we bought in cash

Shortly after we bought this car, we realized that we would need another car (Tara and I both worked at the time). We knew we didn’t want to buy a car with credit this time and decided to find a car to buy with cash. We found an old Honda that was listed for $1,500.The seller was a private seller close to where we lived. He wasn’t trying to up-sell us on anything and was willing to work with us having only $1,200 cash. We bought this car pain free and drove it for another year before selling it and moving to Texas.

Not everyone’s experience with buying a car on credit is necessarily bad. I think our experiences are especially bad looking back on how it has hurt our financial growth. We were really good at paying extra on our cars and getting out of debt, but if we could have put that extra money towards investing, we would have had around $15k+*.

In our society it is “normal” to have a car payment. We have decided that we don’t want to be “normal” anymore. Our next car purchase will be with cash. And the next. And the next. And the next. You get the point. It takes time and dedication to save and pay cash for a car. We currently drive a paid for SUV that we love. I think because we own it and don’t have payments on it, we appreciate it even more. It’s no longer a burden, but a blessing.

The difference

The biggest difference for us buying cash compared to on credit, wasn’t the actual buying experience. It was after we had bought the cars. Our first car left us with few options after we had gotten in a crash. The second car had issues that we had to fix on top of making payments. Most of all, we slowed down our path to wealth.

Not having payments has helped us to grow our net worth substantially. We are able to take trips like the one we are going to in May. But most importantly, we don’t have the stress that car payments bring.

What experiences do you guys have with buying a car? Did it feel different buying cash over on credit? Does it help bring you peace of mind?

*This is based off of us making double the payments at $240/month over 4 years with 11% returns. Dave’s Calculator