Is It Biblical to Borrow to Buy a Car?

(Originally published on the Christian Community Credit Union Blog)

If you’re like most people, transportation is one of your three largest expenses. The other two are housing and food. The larger the expense category, the more important it is to make good decisions in managing the category well.

Just the facts

Buying a car can be a very emotional decision. Even if you’re not “a car person,” there’s a lot of cultural pressure around cars. For one thing, doesn’t it look like just about everyone is driving a newer car? The older your car gets, the more left behind you may feel. Planned obsolescence only increases the temptation to buy. Car manufacturers make frequent stylistic changes to their products, wanting to spur sales by making older models look outdated. When it comes to buying a car, what’s a well-meaning, stewardship-minded Christian to do? More specifically, is it okay to take out a car loan? Let’s try to answer that question by considering three others.

1. Why do you want to buy?

Do you actually need to buy a car? If you’re a recent college grad with a new job that requires you to have a car to get to work, maybe you do. Or, maybe your car is so old or in such bad shape that it’s dangerous to drive. Of course, those aren’t the only “valid” reasons to buy a new or newer used car. But there may be some less-than-good reasons to buy, such as just being bored with your current car, even though it’s still in good shape, or feeling the pressure to keep up with what your friends or co-workers are driving. So, the starting point is determining whether you actually needto buy a car.

2. Can you afford to buy?

(Proverbs 22:7)If you’re intent on buying but it’ll require a loan, there are no biblical prohibitions against borrowing. However, there is this cautionary note: “The borrower is slave to the lender.”

Take an objective look at whether a car payment will fit on your cash flow plan (a.k.a., “budget”). The ideal place to begin in drafting a cash flow plan is with generosity because the Bible teaches us to make generosity our financial starting point (Proverbs 3:9). It also says it’s wise to build a reserve of savings (Proverbs 21:20). Ideally, you would allocate at least ten percent of your monthly gross income to generosity and ten percent to saving/investing.

After making provision for those priorities, enter all of your essential expenses (such as your mortgage or rent, food, utilities, and insurance), and then your discretionary expenses (i.e., entertainment, vacations, clothing, and gifts). Is there any room for a car payment? If so, how much of a monthly payment could you afford?

3. What are the best terms?

If you decide to finance a car, be intentional about the details. There may be some especially long loans available to you, such as loans that stretch out to seventy-two or even eighty-four months. While signing up for such a loan will make the monthly payments lower than a shorter-term loan, you will, of course, have the loan for a longer period of time. Plus, you’ll end up spending more on interest over the life of the loan.

From a strictly objective financial perspective, it is best to borrow no more and for no longer than necessary. That may mean holding off on your car purchase for a while, if possible, to save for a larger down payment. Or, it may mean opting for a less expensive car.

Make the decision with care.

Remember, the process of buying a car can be fraught with emotional landmines. “Everyone else” seems to be driving a newer car, and the latest models can make your car look outdated. So, before heading to the showroom, pray about the decision and run some numbers. If you decide to finance a purchase, carefully consider the terms of the loan.

Image used with permission