Taking a car loan can end up being a very expensive way to purchase a car. The better option is buying a car with cash. Don’t think it can be done? These money saving tips will help guide you step-by-step on how to buy your next car without a loan.
We have all seen and heard the spiel; “Buy a car with no money down and bad credit.” The ads are all over Facebook, television and radio at the very least. What those ads don’t tell you is that you will be paying a sky high interest rate on that car. Sometimes the rate is so high it nearly doubles the amount of your loan. The better option is letting those ads pass you by and buying a car with cash instead.
Buying a car with cash may seem impossible, but it is not as difficult as you may think. The process might not be as fast as getting a loan, but it can still be completed in a reasonable amount of time. The journey will be a challenge for you and your family, but once you’ve accomplished it, it will all be worth it. As with any journey, the hardest part is getting to the destination.
Can You Pay Cash for a New Car?
Yes! Most people seem to be under a common misconception that buying a car with cash means you are only going to be able to purchase a rust bucket. This could not be farther from the truth.
There are many benefits to buying a car in cash. One of the largest is no interest. The interest on a loan can often be thousands of dollars more than the loan itself. By removing the interest, you ensure that you only pay the cost of the car and nothing more.
1. Get Committed to Your Journey
The first thing you should do before buying a new car is to fully understand what you are doing. It is not easy to purchase a car with cash. In fact, it can be downright hard and a lot of work. It might seem obvious, but the work involved will make it easier for you to get discouraged or to lose your initial motivation. Getting discouraged or losing motivation will make you very likely to get off track sooner than you anticipated.
You will have a greater chance of success if you are prepared and confident about your financial decision. Keeping yourself motivated requires knowing it will be hard work and take some time.
Staying motivated means knowing what your goals are, but your level of commitment is also important. If you are not fully committed to the work you have before you, you are just as likely to get off track as you are if you don’t understand. In order to successfully buy a new car with cash, you will need to be fully committed. You risk getting sidetracked if you don’t focus on the task at hand.
2. Choose a Reasonably Priced Vehicle
I can’t think of a single person who does not have a dream car. We all do, right? Well, chances are good that if you are buying a car with cash, it is not likely to be your dream car.
I mean, it’s possible but unlikely.
And honestly, trying to buy your dream care – unless it happens to be a reasonable price – is only setting yourself up for failure and heartbreak if you can’t manage to buy it.
Instead, work toward buying a reasonable priced car with cash first. Once you have your immediate transportation needs taken care of, you can work toward saving money for your dream car.
It’s a process and it may take you years to buy that dream car, but in the end, you will be glad you took the long way.
3. Plan a Budget
The first thing you should do is establish a budget before you decide to buy a car with cash. In the absence of a budget, you are simply throwing money into an account and hoping you will have enough money in the future.
Finding several cars you would like to own is the easiest way to do this. Determine which of those few is within your means. Look up the MSRP for the vehicle you want, as well as any optional packages you may want.
Tip: After you have done your car budget, keep the money in a place it is not easily accessible. For most, this will be an external bank account connected to their regular bank account. With an external bank account, you can still withdraw the money easily, but it takes 2-3 days to reach you. This extra time gives you a chance to rethink whether you really need the money or not. One bank that I highly recommend for this is Aspiration. Their offer a great APY (aka interest rate) on your money which really helps it to work for you.
4. Don’t Forget to Plan for Extras
As you’re setting your new car buying budget, you’ll also want to be sure that you save money to cover any extras. If not, you will likely find yourself short of the money you need. These can include things such as insurance, registration fees, repairs that may need made and so on.
Often, these extra expenses can really add up. Car insurance alone can often cost several hundred dollars – or more! – per year. Forgetting to account for them in your budget is a mistake that you simply don’t want to make.
5. Set a Goal Date
Once you determine the total amount needed, you need to set a timeframe. This is the date on which you intend to purchase your car. It is important to know these dates so you can save up money for them. To put it simply, plan to allow yourself plenty of time for this. Most people who do this take at least one year, with many taking two years or more.
Once the date is set, count the amount of paychecks you will receive from the next pay period. Divide the total amount you need by the number of checks. This is what you will need to save per paycheck to buy a car by the due date.
If it doesn’t look like you can save the amount of money you’ll need by the goal date you have three choices. You can change the car you want to purchase, change your goal date or do what you can to make more money. The option you choose will be up to you, but I do not recommend changing your goal date. This will put it into your mind that goals dates are just there and not something to work toward.
6. Take Your Time
Finally, don’t rush into things when you go to buy a car with cash. Actually you shouldn’t rush into it at all when you buy a car in any way.
There are more than enough cars on the market for you to be able to take your time. If you are buying a used car with cash, take the time to have a mechanic look it over. Drive your potential purchase more than once. Give it more than one “once over.”
In other words, only buy a car with cash after you have taken the time to make sure that the car you are interested in is worth giving up your hard earned cash and not a moment sooner.