Smith 
She was my pride and joy—a champagne-colored 4-door ’98 Chevy Lumina Sedan, perfect for a grandmother, and in fact, my grandmother did drive it. I called her "Nanny". Before the Lumina, I drove a 4-door ’96 red Pontiac Grand-Am. I guess I had a thing for 4-door cars! I bought the Grand-Am when I moved back to Illinois for junior college, making it the first car I was responsible for paying off. I was thrilled. It was my car, and I was driving it. I was lucky to have an amazing grandmother who paid it off as a graduation gift.
Not having a car payment was huge for me. Even though I often pictured myself in a much cooler car, it was nice having extra money to enjoy life. I supported myself through college with some help from the National Guard, and spending $250 a month on a car payment didn’t make sense.
Initially, I dreamed that once I graduated and got a real job, I’d drive something sporty like a BMW. If not a BMW, definitely something foreign—anything better than my Grand Am. Then, a professor in my Finance 361 class changed my perspective on car payments forever. He asked our class how many of us planned to buy a new car every 3-5 years, and I was one of the first to raise my hand, thinking, "Heck yeah! I’m getting a new BMW every few years."
Many of my classmates raised their hands too. The professor then said something that stuck with me: “Enjoy making your car payments for the rest of your life while I take my family on vacations to Europe.” He explained the concept of the time value of money and compounding interest, which I wasn’t familiar with. We ran the numbers, and it was shocking how much money I would waste on car payments over time. I felt foolish for raising my hand.
A few years into my career as a financial advisor, my grandmother passed away. I inherited the ’98 Chevy Lumina—“The Lu” as my wife called it. My Grand Am had racked up some miles and started having issues: engine lights, strange rattles, and a nasty smell from leaving the windows down in the rain. Despite being older, the Lumina had 70,000 fewer miles on it and was in great condition.
I had the option to sell both cars and use the money for a down payment on my dream car. It was tempting. I thought long and hard about it but eventually gave myself a reality check. Instead, I sold my Grand Am and kept the Lumina. This decision saved me from wasting money on a BMW I couldn’t afford. Without a car payment, I was able to invest heavily in my Roth IRA and 401(k), maxing out my Roth IRA every year since I started working. Conservatively, I was able to invest at least $400 per month, money I would not have had if I was making car payments.
Using a compound interest calculator, I saw that if I invested $400 per month at a 10% annual return until retirement at age 65, I would have around $2,883,185. Even at an 8% return, it would be $1,527,399. Huge numbers! Delaying investing by buying a new car would mean ending up with $2,081,337—a difference of over $800,000. Just three years of early savings made that much impact.
The idea of not having a car payment might seem unrealistic to some. A friend once argued that having a car payment meant always having a warranty. But cars don’t always break down. I’m not against car payments, but I am against being convinced you need to buy a brand-new car. One rule to follow is to invest more per month than you spend on car payments. It’s alarming to see couples wasting $700 per month on car payments but only saving $100 monthly. Cars depreciate; you can’t grow your money through car payments.
In the spirit of financial wisdom, it’s clear that not having a car payment is better. The title claimed my Chevy Lumina made me over $2,000,000. In reality, it showed how saving early and not wasting money on cars laid the foundation for financial security. Sacrifices for a few years paved the way for financial success. What sacrifices have you made for your future prosperity, and how long did it take to see the impact?
