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Every so often in life, you or someone you know needs a new car. Whether the old one finally gives up after 200,000 miles, or you just want something different, or the family is growing, or…or…or. When it’s time to go car shopping most people do one of two things: they either drain their savings account or they march down to the dealership and sign up for a car loan at whatever interest rate the finance manager quotes them.
But what if there was a better way? A way where you could buy the car, avoid giving your interest payments to a bank, and actually build wealth in the process?
That’s exactly what infinite banking makes possible. And yes, you absolutely can buy a car using this strategy.
But before I tell you how, let me share a real story from one of our clients…
Sometimes the best plans require patience and flexibility. This is exactly what Kristin from California discovered when she decided it was time to upgrade her vehicle.
Kristin had started a policy through our office about six years ago. Not only did she set up a policy on her own life, she also started one for her daughter. Starting policies for your children comes with so many benefits and opportunities for the future. Purchasing a well-designed whole life insurance policy for your children is one of the best gifts you can give, because it’s the gift of opportunity and resource. It allows your child to start out strides ahead of their peers in the financial world.
Policy cash value can be used to purchase your child’s first car, their first home, college tuition, help them start a business, finance travel, weddings, you name it. There are no restrictions on how the money can be used, and the cash value always grows guaranteed.
Kristin and her daughter enjoy traveling together, and Kristin decided it was time to get a car that could pull a trailer for easier and more convenient trips. After carefully considering her options, she decided on a Lexus GX 550.
There was just one problem – the car wasn’t available yet. This was back in January, and Kristin knew this was the car she wanted, so she was willing to wait.
The months went by. February, March, April, May, June – still no car. Then in July, Kristin was deployed. And of course, that’s when the car became available.
The dealership wanted her to pick it up right away. But with her deployment, that was not going to be possible. At first, the dealership told her they wouldn’t be able to hold the car. But finally, they relented and agreed to hold it a few days.
A few days was all Kristin needed. In early August, she went to the dealership with the funds from a policy loan to purchase the car.
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Here’s where the story gets really interesting.
During the purchase, the dealership told Kristin she could qualify for a military discount if she financed the car through them. The military discount was $1,000.
Now, Kristin had planned to pay cash to avoid the high interest rate the dealership would charge on their financing option. But the military discount of $1,000 was only available if she financed through the dealership.
What would you do if you were Kristin in this situation? You had the cash to purchase the car outright, but now you learn you could save $1,000 by financing through the dealership. But if you finance through the dealership, you’ll have to pay a high interest rate.
Here’s what Kristin did. She quickly looked through the financing contract, looking for an early payoff penalty clause. There was none.
So Kristin did the smart thing. She took advantage of both options. She purchased the car by financing it through the dealership and saved $1,000. Then she paid off the car with the cash she had taken from her policy, avoiding the high interest rates associated with financing through the dealership.
Kristin shared her plan for repaying her policy loan with us. She knows the power of infinite banking isn’t just the ability to access capital anytime for anything. It’s also about the return of your capital.
Having the ability to determine a repayment plan that is comfortable and affordable and being disciplined to follow that plan is the power behind infinite banking. That’s what puts you back in control of your financial destiny.
Kristin plans to start with a lower monthly payment and keep it low for about 17 months. After 17 months, she’s anticipating an increase to her cash flow, which will allow her to increase the amount for her monthly loan repayment.
In contemplating the best loan repayment structure, Kristin used money tools to see how different interest rates and payment amounts would affect the terms of her loan. She was excited to see how each scenario played out, and ultimately she chose the one that made the most sense for managing her money at this time.
So far, Kristin has used policy loans to start a business, fund her daughter’s Montessori school, and now purchase this car. For anyone thinking you have to wait years and years to allow cash value to build up in a policy so it’s available to use, Kristin’s story is the perfect demonstration.
Yes, cash value does build up over time, allowing you to increase the size of opportunity you can finance. But no, you don’t need to wait years to begin using the cash value of a policy.
Remember, Kristin’s policies are only six years old.
The important thing is that you get started with something. Imagine if Kristin had waited until now to purchase her policies. That’s six years, a business, Montessori school, and this new car that would have gone by.
Don’t make the mistake of waiting. Time and opportunities will go by whether you get started or whether you wait. But six years from now, you’ll either be saying, “I’m so glad I at least got started,” or “I wish I would have.”
Let me break this down step by step, because I know it might sound too good to be true. (It’s not. It’s just a different way of thinking about money.)
When you set up a properly designed participating whole life insurance policy, you’re building a pool of guaranteed cash value. This cash value grows every year, and you can borrow against it at any time.
Here’s what happens when you use your policy to buy a car:
Step 1: You take a policy loan
Let’s say you need $25,000 for a car. You contact the insurance company and request a loan against your policy’s cash value. Often you’ll have the money within three to five business days. No credit check. No complicated loan application. No waiting for approval.
Step 2: You buy the car
You pay cash for the vehicle. You’re now the outright owner – no lienholder, no monthly payment requirement from a bank.
Step 3: You pay yourself back
You set up a payment plan to repay your policy loan, just like you would have paid a commercial bank. If you would have paid $443 per month to a bank, you pay $443 per month back to your policy loan.
But here’s the difference: Your policy’s cash value continues to grow even while you have an outstanding loan. The insurance company holds your paid up insurance as collateral, but the policy’s cash value keeps earning guaranteed growth and dividends.
Step 4: The money is available again
Once you’ve paid the loan back, money is available for your next purchase. You can finance another car, pay for property taxes, buy business equipment, or use it for anything else you need. You’ve essentially “become your own bank.”
This is the question everyone asks. And it’s a smart question.
Yes, you do pay interest to the insurance company on your policy loan. But here’s what most people don’t understand: when you’re a participating policy owner in a mutual life insurance company, you’re not just a customer. You’re a part owner of the company.
The interest you pay doesn’t disappear into some banker’s pocket. It goes back into the insurance company’s general fund, the same fund that pays dividends to policy owners from the profits of the insurance company. This means some of the interest will come back to you in the form of dividends and policy growth.
Compare this to a traditional bank loan. When you pay interest to a commercial bank, the money is gone forever. You’re transferring your wealth to the bank’s shareholders and executives.
But with a policy loan, you’re paying interest to yourself indirectly, through your participation in the mutual company AND you don’t lose the underlying growth of your policy values.
There’s another benefit that often gets overlooked: flexibility. If you hit a tough month financially, you’re not required to make your policy loan payment. You won’t get a collection call or a repossession notice. You can skip a payment, make a partial payment, or even stop paying altogether if necessary. (Though you will want to resume payments to keep the strategy working well for you.)
Here’s another scenario:
Imagine you need to buy a vehicle that costs $10,000. You’ve been saving $500 per month, so you’ll have the cash in 20 months.
Option 1: Traditional Bank Financing
Option 2: Pay Cash from Savings
Option 3: Infinite Banking with a Policy Loan
In the Infinite Banking scenario, you’re recapturing the money that would have been lost, which means you can now take advantage of additional opportunities. By keeping money in motion, working for you, you can make the purchases you need in life and come out ahead of everyone else.
Infinite banking isn’t always the best choice for every single purchase. There are times when it makes sense to use other financing methods.
Here’s when using a policy loan for a car purchase makes the most sense:
It’s Not Just About the Car
Buying a car with infinite banking is just one application of a much bigger principle.
When you learn to self-finance purchases like cars, vacations, or business equipment, you’re building the skill and the capital to finance bigger things in the future including things like: Your mortgage. Your child’s education. Your business growth. Your retirement income.
Whatever it you finance, the steps you take and the things you learn, build on each other, strengthening your financial foundation.
As Zig Ziglar says, “You don’t have to be great to start, but you have to start to be great!”
After working with hundreds of clients over the years, we’ve seen some common pitfalls that derail people from successfully using infinite banking to buy cars. Here’s what to watch out for:
Mistake #1: Getting the wrong kind of policy
Not all life insurance is created equal. You need a properly designed participating whole life insurance policy from a mutual company. Universal life (UL), indexed universal life (IUL), or variable universal life (VUL) policies won’t work the same way. And even whole life policies (WL) can be designed poorly if your agent prioritizes their commission over your cash value growth.
Mistake #2: Not paying yourself back
The strategy only works if you maintain the discipline to repay policy loans. If you borrow and never repay, you’re just depleting your death benefit and limiting your future borrowing capacity.
Mistake #3: Borrowing for the sake of borrowing
Just because you have money available to borrow, doesn’t mean you should. People who borrow just for the sake of borrowing, or think that taking a loan will make the policy grow faster, but don’t have a good use for the money, aren’t really doing themselves a favor. Remember policy loans are interest bearing loans. They can provide powerful access, leverage and flexibility when used wisely. When used in a reckless manner, they can work against you.
Mistake #4: Thinking it’s magic
Infinite banking is powerful, but it’s not magic. It’s a sound financial strategy that leverages the unique characteristics of participating whole life insurance. It requires understanding, discipline, and patience.
Absolutely, yes.
Should you? If you’ve built up sufficient cash value and understand how to execute the strategy properly so it benefits you, yes!
But more importantly, you should understand that buying a car with infinite banking is just the beginning. It’s the entry point into a completely different way of thinking about money, wealth, and financial freedom.
When you learn to think and behave like your own banker, you take control of the financing function in your life. You stop transferring your wealth to commercial banks. You start building a financial asset that grows stronger with each use.
You don’t need millions of dollars to start. You don’t need to be debt-free first. You just need to start where you are, with what you have.
As we always tell people: It doesn’t matter where you start, as long as you start. And the start that you make will create a foundation to lead you to greater success.
So yes, you can buy a car with infinite banking. And really, this is the first step on a much longer journey – a journey toward becoming your own banker and taking control of your financial future.
The question isn’t typically whether you can do it. The question is: When will you start?
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.