HOW TO PAY FOR A CAR IN CASH (WITH EASE)
Overview
Are you ready for a big revelation? – Car payments are NOT a requirement! In fact, I can show you how to pay for a car in cash. There. I said it. But half of you probably still don’t believe me. By the end of this article, I’m hoping to change your mind. Because here’s the truth: I haven’t had a car payment in about 7 years, and I don’t plan to ever again. In that same time, I have purchased cars in cash.
To pay for a car in cash, you need to identify how long you have to save, determine how much you can afford to save each month during that time frame, total up your potential savings and other available funds, and shop for vehicles in that price range.
How To Pay For A Car In Cash- Step 1: Determine Your Timeframe
It probably goes without saying, but the fact is we’re all probably just living in between vehicle purchases. The day you buy a car, the countdown clock starts running until it dies on you. So, the first thing you’ll want to do to make sure you ditch car payments for good is determine where you sit on this timeline.
Most of us can probably see the writing on the wall as a vehicle approaches the end of its reliability. When that time comes, make your best educated guess (or seek a professional opinion) concerning how much longer you’re comfortable driving it. With any luck, you’ll figure this out months in advance.
The big question here is “How much longer do I feel good about driving this vehicle?” Answer that question, and you’re ready to move on.
How To Pay For A Car In Cash- Step 2: Determine Your Monthly Savings Goal
Now, let’s assume you were responsible, kept up with your car maintenance, and identified that you would be ready to move into another vehicle within the next year or so. That sort of timeline will definitely make this step easier.
You’ve got twelve months. Let’s assume that you look at your budget, and are able to trim a few areas back and come up with around $500 a month. (Again, you’ll probably reach your number by finding a little bit of money in a lot of places. Don’t feel like you need to completely cut out retirement savings for a year!) You’ll now start a sinking fund for your new car purchase using that money.
Remember, this is a savings goal. Keep this money liquid. No investing. You’ve got to get from point A to point B in some sort of vehicle in 12 months, and you can’t afford to lose your savings in a high-risk investment. Just let it pile up.
Basically, determine, using your budget, how much you can begin to set aside each month for a new vehicle.
How To Pay For A Car In Cash- Step 3: Identify Other Available Funds
Once you’ve determined how much you can begin saving monthly, identify any other funds you may have available to throw at your purchase.
Maybe it’s finally time to sell the Bowflex and the Treadmill. When was the last time you used them? Or maybe you’ve gotten a monetary gift recently that you have been trying to figure out how to use. Get creative.
The most obvious source of extra funding will be your current vehicle. Assuming you haven’t driven it into the ground, it’s probably still worth something to someone. Even $2,000 or $3,000 may go a long way.
Figure out what else you can sell or move around to beef up your new car fund, and start making those moves.
How To Pay For A Car In Cash- Step 4: Determine Your Potential Price Range
Once you’ve got a rough idea of your potential savings and other funding sources, it’s time for some math. Not hard math. Just add it up.
Going back to our example, we’ve saved $500 per month for 12 months. That’s $6,000 right there. Add $3,000 from the sale of our old car. Now we’re up to $9,000. Let’s assume we got creative and dug out another $1,000 over the course of a year, and our final number is $10,000.
Let me say that again: Just by doing some simple planning and making some minor budget cuts, we’ve figured out a way to set aside $10,000 in only a year’s time.
Your real numbers may be different obviously, but again, just add up your potential monthly savings, the value of your current vehicle, and any other creative funding you can find to get your approximate price range.
How To Pay For A Car In Cash- Step 5: Shop and Find A Deal
And finally, once you get near the end of your time frame, it’s time to start shopping for cars.
Take your time here. Do some research on any vehicle you look at, and make sure you get something reliable. I’ll admit right up front, I’m not a car person. Put me in a Honda that will run forever, and I’ll drive it until it just won’t go. Maybe that’s not you. Just be smart, and don’t fall into the the trap of “just taking out a small loan to cover the difference.” No, you dedicated yourself to paying cash, don’t trip at the finish line.
Something else to keep in mind at this point is that cash goes a long way toward bringing the price down, especially when buying from an individual. If you have the cash on hand, and ask for a lower price, they’ll probably take it. Or at least meet you halfway.
Cash is a powerful bartering tool. Shop smart, and use it.
Conclusion
Stick to this plan, and you’ll be able to put car payments in your rearview mirror. (Sorry…I had to do the pun.)
To review, to pay for a car in cash, you need to identify how long you have to save, determine how much you can afford to save each month during that time frame, total up your potential savings and other available funds, and shop for vehicles in that price range.
And, as always, regardless of your money goals, you can “Bank on a Budget” to get you from where you are to where you want to be!
Cash is a powerful bartering tool. Shop smart, and use it.
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Have you ever paid for a car in cash?