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I'm a writer and personal finance expert from Halifax, Nova Scotia. I write about saving, budgeting, and debt.

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How I Paid Off My Car Loan in 1 Year

Happy New Year!

We’re only a few days into 2018, and already this year is starting off so much stronger than 2017. On January 1st, 2017, I spent the day in the emergency room, my willpower was at an all-time low, and when our 2007 Volkswagen Golf started making yet another set of weird sounds, I threw in the towel and financed the purchase of a new-to-me Subaru Crosstrek. Suddenly, after a moment of weakness, I found myself in the same situation as so many other Canadians: I once again had a car loan.

I never planned to spend 2017 with a car loan. My original plan for the year involved renovating my 84-year-old home, which, while perfectly serviceable as is, is in dire need of a new bathroom, and the attic is begging for a proper renovation to make it a livable space.

Instead, after borrowing $4,000 from my emergency fund as a down payment, I found myself in possession of an $18,500 debt at an unsavoury 5.9% interest rate. For six months I fooled myself into thinking I could do both, renovate my house and pay off my car loan, and after six months and only $7,000 paid down, I decided that doing both was boring, and it was time to tackle my debt with everything I had.

I’m a goal-oriented person, and financially I work best by focusing on a single goal at a time. Focusing on one financial priority at a time is how I managed to pay off $38,000 in two years, how I stacked a $10,000 emergency fund, and how I saved a 10% down payment for my house in a year and a half.

So in June, I decided to throw everything I had at the remaining $11,000 balance of my car loan, and over the past six months, I’ve done just that.

At the end of 2017, I paid off that car loan for good. Here’s how I did it:

I Sold My Car Myself

My husband and I are a one-car household, which meant after buying our new car, we had one car too many. The dealership offered us a pathetic $1,200 for our old car, but after sprucing it up, I was able to sell it myself for $4,000. I used to repay the $4,000 I’d borrowed from my savings for the down payment, which left just the $18,500 left to pay back.

I Ditched My Car Loan for a Line of Credit

While I did go with a car loan from the dealership initially for simplicity’s sake, the interest rate was far too high, and I knew that I needed to get that lower if I had a hope of paying it off in one year. So once the remaining balance dropped to $15,000, I moved the remainder to a line of credit at 4.7% interest.

By shifting my debt to a lower interest credit tool, I cut down the monthly interest I was paying so that more money went to paying down the principal, and less went towards interest. I also liked the idea of using a line of credit instead because, if an emergency like job loss hit, I could drop the payments down significantly, versus a car loan, where payments are fixed.

I Treated My Monthly Payment Like a Minimum Payment

The problem with having a car loan is that if you aren’t careful, it’s dangerously easy to get used to that monthly payment. You budget for it, you make it automatic, and before you know it, you’re comfortable with it. The desire to pay off a car loan fades when it becomes just another part of your finances.

To avoid this, I treated my regularly scheduled monthly payment as a minimum payment. If all else fails, I’d pay the monthly payment, but I budgeted more. The first few months of new car ownership my minimum payment through the dealership was $300. But I made payments of $505 per month and added an extra 25% of my freelance income on top of that. By adding my car payment as a bill in my Tangerine chequing account, making additional payments only took a few clicks. Later, when I made my car loan my #1 financial priority, I was paying over $700 per month towards the loan from my budgeted income, and 50% of my freelance earnings.

I Used My Savings

At the end of December, I still owed about $2,500 on my car loan. A few more months would’ve taken care of it, but I was just so sick of the loan that I pulled money from my savings and paid it off. I was aware of the emotional toll paying off this debt had taken on me, and at after a year of paying it down, I was so very over it. Instead of carrying my car loan into 2018, I finished it off, and I’ll spend the first few months of 2018 building my savings back up.

I Made Plans for Life After My Car Loan

With so many Canadians living with a car loan as a regular part of their lives, it would have been so easy to get comfortable with my loan and spend five or six (or seven or eight) years paying it off. But that’s not for me. I like keeping my monthly expenses as low as possible, and a $300 car loan doesn’t align with that value. On top of that, I’d lived car loan free for three years, so I knew how it felt to own a paid-for car, and I wanted to go back to that. I wanted that money for other things like home renovations; I didn’t want that constant drag on my finances for the next half dozen years.

Pride of Ownership

Finally, owning your vehicle just feels right. So many of the positive results of proper financial management are invisible. Being student loan free, credit card debt free, saving for retirement, having an emergency fund, you can’t see any of that. There are only a few results of sound financial management you can see. Owning a car is one of those.

Plus, I just like my car better when I own it outright. Who said personal finance doesn’t have an emotional component?

Do you have a car loan? Are you prioritizing paying it off? Tell me all about it!


  1. Mrs. Farmhouse Finance says:

    Wow! Great job paying off the loan in one year. Two years ago we got tired of all the issues with my 2001 Outback, and took out a loan to buy a 2013 Impreza. We have been doubling up (sometimes tripling up) on payments each month, and should have it paid off in a few months. We have other savings goals right now (our house being the big one), so as tempting as it is to pay the loan off right now, I think we’ll pay it off in chunks over the next few months. Great post!

    • Jordann says:

      Congrats on joining the car-loan free club soon! I was in the same boat with my 2007 Golf – I’d been trying to save for a new car for a year, and repair after repair kept wiping out my savings.

  2. Melanie says:

    That’s great that you were able to pay it off in one year! My husband likes to have brand new cars, and I don’t care about them so much. I took over his 2012 Escape, and last year in May, I paid the final payment for the loan. i love not having a car payment! however, since I was so used to that money coming out of my account every two weeks, I kept the deduction going, and redirected it into a savings account. I now already have $5,000 saved for whenever it’s time to replace this vehicle (I hope to get to $20,000 saved).

    • Jordann says:

      I’m very fortunate that my husband grew up in a household where cars were bought outright and driven until they quit – so he has no problem with us buying and holding cars. In fact, he was pretty resistant to upgrading because he thought our 2007 Golf had plenty of life left in it.

      That’s a great thing to do with your payments! I’m doing the exact same thing – all of the money that went towards my car loan is now going towards building up my savings.

  3. Stuart says:

    Congratulations – that’s awesome to have paid it off in such a short period of time!

    I haven’t purchased a car with any kind of finance myself (2 moderately used Mazdas over the past 7 years, paid cash, only sold the first one because I had moved to Canada), but I find I still get good mileage and modest running costs out of them.

    Agreed thst it definitely feels good to own a car outright though.

  4. Katherine says:

    I love your blog. Just found it! Thanks!

  5. […] year, a huge portion of my freelance income went towards our big joint financial goal: pay off our car. Because of my contributions, we were able to do that in just one year. That was my choice, and […]

  6. […] is the exact debt repayment spreadsheet I used to pay off my $38,000 in 24 months and pay off my car loan in one year. It isn’t the prettiest thing in the world, it doesn’t produce graphs or pie charts, […]

  7. […] of dollars to pay for his schooling in cash. I wish that was the case, but we spent all of 2017 paying off our Subaru Crosstrek, which left precious little time to save for upgrading his education, especially since said […]

  8. Sadiq says:

    Hi Jordann,

    I was in a similar situation when I had to bite the bullet and replace my 15-year-old daily driver with a newer vehicle. This happened in July 2017, right before Hurricane Harvey made landfall in Houston where I live.

    Dealerships nowadays are in no mood to offer competitive financing, even to people who have excellent credit. I was staring down the barrel of a 3.99% interest rate over 48 months. It may not have been a terrible rate, but I knew it could be lower. The first order of business was to refinance that with a credit union who came in at 1.75%, and I promptly had them take over the loan.

    With the financing sorted out, I promised myself that I wouldn’t take 4 years to pay off my car. So each month, if I had any extra funds left over, it went towards the auto-loan as a principal-only payment.

    Any time I received any funds that I hadn’t budgeted for, they went towards the car loan:
    – Over-time pay
    – Refund checks from the mortgage company for escrow overages
    – Tax refund (this helped out a TON)
    – Side gigs
    – Part-time job
    – once I found a $10 bill in my jeans right before doing the laundry … even that went towards the loan

    I am happy to say that my $22,000+ auto loan (that was financed over 48 months) will be paid off in 14 months instead. Vlad the Impala (pun-intended) will be entirely paid for!

    I just wanted to let you and all of your readers know that it can be done, and it’s not insurmountable. Keep plugging away at those debts, y’all!

    – Sadiq

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