Finance Friday

Finance Friday: Save Enough To Buy Your Next Car in Cash

BuyUsedBMWInCashA person’s car has been referred to as “a person’s baby,” on many occasions. Although a baby and a car both need care and attention, generally, cars began to depreciate in value as soon as they are driven off the dealer’s lot. I remember my 7th grade teacher, Mr. Turner, use to tell our class : “If you become rich, don’t waste your earnings on a new car. Buy a used one, and use your money to make promising investments instead.” His two-second advice during class stuck with me.

Together my husband and I drafted a joint budget after we first married and decided, in order, which big-ticket items we would purchase first. We wrote down our list, then separated it by needs and wants, and then numbered each item according to their priority level. Next we determined how much in cash (an estimated figure) we needed to save for each so we would not need to finance the items.

After having our last car for almost 10 years, which cost less than $3,000. It was time to find something more reliable, since we also had to look out for our children’s well-being too.

Here are the steps we took to save and pay in cash for our car.

1. Budget and set a clear goal.

The goal should be set based on your needs and not necessarily all of your wants.

2. Establish a savings plan and a time limit to achieve our goal.

For us, we set aside $10/week, $5 each for 2 years. At the end of our savings period we saved $12,680. If you want a 1 year plan consider putting aside more. There are about 52 weeks in a year so if you save $200 a week you’ll have $10,400 in 12 months.

3. Open a free savings account.

This account will allow you to store the money and accrue interest. It will also help you save the money without easily using it, when you desire. With the added interest we surpassed our savings goal amount.

4. Research vehicles that will best suit your needs and your lifestyle.

Your research should include the following:

  • Which cars among the ones you like the most are the safest?
  • Which cars were least likely to get in an accident?
  • Which cars received the lowest need for maintenance?

Also, consider the type and amount of gas the vehicle uses.

We chose to purchase a used car because many of the quirks are heavily documented and we could purchase exactly what we wanted at only a fraction of the original cost.

5. Search Kelly Blue book for the cost of the car you decided on.

The search should be done when you set your budget and then again, when you plan to make your purchase. This helps so you can estimate how much others should be charging. Or give you a ballpark figure regarding the cost.

6. Search online for cars that fit the description of what you want in your area and the closest surrounding areas.

Remember that sometimes you can find your best deals from an auction or an individual and not a dealer. However, if you need a warranty to be factored into your sell and your level of expertise to do car maintenance is slim, then you should go with the option that has more warranties and not necessarily the lowest cost.

7. Don’t forget to add taxes and other fees.

Your car purchase will include taxes, title fees, and other fees as well, which are determined by where you live and where you buy your car. Just keep this in mind and consider buying the car at the lowest price including the taxes and other fees, which quickly add up.

8. Find your car and test drive several before you make your final decision.

Search the car and inspect it to make sure all of the car parts are in tact and everything functions properly. If you have kids, make sure all of the seat belts and latches are working properly as well.

9. Sleep on it.

In my opinion, big costly purchases should not be decided on a whim. Don’t be overly anxious. Relax and allow yourself a chance to make the best decision.

10. Return and negotiate.

Because your purchase will be in cash the seller’s money is guaranteed so you should be able to get a special cash discount. Remember almost everything is negotiable.

These are the steps that worked for us. We purchased our car in cash and sold the older one. which allowed us to still have plenty of money left over to put towards our next savings project.

Reader response question: What’s your top tip when purchasing a new car?

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  • Rasheed

    buying a used car makes it a lot easier to buy with cash.

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