Many Americans pay over $400 a month on car leases or loans and the numbers keep rising every single year. In a world where keeping up with the Joneses is normal, the average person may feel the need to get a car they can’t afford, just to impress those that shouldn’t matter.
7 Ways to Pay Cash For Your Next Car
Here’s the thing, car loans are expensive, and they can actually be avoided, even if you live on a lower income.
Here are my top tips to help you pay cash for your next car.
This post has been written by our staff writer, Kimberly Studdard.
Drive Your Car Until You Can’t
If you have already have a car, you should drive it for as long as possible, especially if you aren’t spending a ton of money in repair costs (besides regular maintenance and items like a new battery, tires, brakes, etc.). I know it’s not fun to drive an old beater, but it can save you a lot of money in the long run. Just remember that it’s not worth getting into a lot of debt for a vehicle. You’ve probably done it before. You know that terrible in-debt feeling. Don’t do it.
If you don’t have a car yet, still pretend like you do. Start saving money as if you have a car note, insurance, and other miscellaneous items you would have to pay for.
Save All Extra Money
If you get extra money throughout the year, like a raise, bonus, or even gifts, save the money as soon as you get it. Saving that money may be hard at first, especially if it’s hard earned cash. But it will pad your savings account a lot faster, helping you pay cash for your next car quicker.
If you are receiving bonuses or raises, continue to live off of the income you were making before. You’ll start to see your savings account growing faster, and this will help you pay cash for your next car a lot sooner than you would just saving money weekly.
Save Money Each Paycheck
Even if it’s just a few dollars, save money from every paycheck in a new car fund. I suggest opening a new savings account or using an online savings to tell the difference between your regular savings and the money you are saving for your car. If you can increase your savings over time, do so! Just make sure to save a dedicated amount every week. No one likes having a car loan over their head, so saving money should be a priority.
Cut Back On Spending
Even if you think you can’t cut back on spending, you can. Do you eat out often? Can you use your appliances a little more wisely? Can you cut down your phone plan while you’re saving money for your car? Finding ways to cut back on your spending can help you pay cash for your next car by offering you a way to save more.
Now, you don’t have to be super drastic when you start cutting back on your spending, but a few sacrifices can really add up in the long run. If it’s a priority to pay cash for your next car, cutting back for a little bit shouldn’t be so bad.
Wait For The Sales
Want to know a not so secret secret? Dealerships LOVE selling cars. So guess what they do when no one is buying them? They hold a ton of sales! The best times to buy a car are at the end of the year, during major holidays like Christmas or Memorial Day, and the end of June/early July. These are typically the times that no one is buying a car, so dealerships have to try to find a way to get rid of inventory without losing too much money.
Some of the best deals tend to be on new cars, but there are also quite a few large sales for used cars too. For example, I bought my car last year for $15,400. That may sound like a lot, but my car was only a year old and had been used as a rental. It had 28,000 miles on it and was worth over $20,000 (it was fully loaded). It was on sale for $17,000 but because I paid in cash I saved even more!
Buy Gently Used
If you’re like me, you may not have the best luck with older cars. Sometimes, you may be better off getting a gently used car, especially if it’s low mileage and has a warranty. So instead of buying a clunker every few years, you can instead drive a car for 5+ years and not worry about so many repairs!
Buy From a Private Seller
Everyone has heard an eBay or Craigslist horror story. But there are so many great cars sold by private sellers that you could miss out on if you aren’t doing your own research. In fact, my sister bought her 2003 Pontiac Grand Am from a private seller for $1,200 and it’s still running like a champ. All we’ve had to pay for is a new battery and brake pads. Who can complain about a few repairs when we’ve saved so much money?
Related: 5 Benefits of Buying a Car with Cash
If buying from a private seller, surround yourself with knowledge about the car, come with your cash in hand to barter and don’t be afraid to test drive the car. Treat the seller as if they were a dealership. You may just be able to find an awesome new-used car, all while paying cash.
When you pay cash for your next car, it can be overwhelming but so rewarding. You don’t have to get into debt to have a reliable and good looking vehicle, you just have to follow a few tips!
Are you going to pay cash for your next car?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.