Last week we purchased our new (to us) 15 passenger van. This is the first time we have purchased an almost new vehicle for cash. We have purchased a few beaters for cash, but coming up with the $1000 needed for the old cars that served as my husband’s get to work vehicle didn’t seem as daunting a task as saving thousands.
Why we decided to purchase our car for cash.
- We don’t like debt. We believe the words from Proverbs 22:7 are ones to live by, …and the borrower is servant to the lender.
- Because we don’t like debt, we have purposed to not take on any debt, except a mortgage.
- We believe you can get a better deal when you pay cash.
- We don’t want to owe money on a depreciating asset.
- Life changes, payments don’t. Just because you can afford payments on a car today, does not mean you can afford them in 3 years. Things happen, people move, have babies, lose jobs. It is hard to be upside down on a car that you need to get rid of for any reason!
Unfortunately there isn’t an easy or fast way to purchase a late model car for cash, it takes work, diligence, and patience. Here is how we did it.
- Live without a car payment. We have lived for the past 3 years without a car payment. This meant my husband drove an old car that wasn’t “cool.” It worked to get him where he needed to go. Our second car was a nicer, newer car that we paid off in 3 years. When we purchased that car (before we realized we didn’t want car payments) we had a rather large car payment.
- Drive your cars until they cannot be driven anymore. If you are switching cars every 3 to 4 years, you will not have time to save for a new one. Yes, older cars need repairs, but it has been my experience that the repairs usually don’t cost as much as a new car payment. When the repairs get so frequent or expensive that they are costing as much as payments we usually start looking for something newer. Even the most unreliable car we ever owned did not cost as much to repair in one year as our payments did on our new car.
- Save your “car payment” in a car fund. Once we paid off our Suburban, we took those monthly payments and started saving them in a car fund. If you had a $300 car payment (below the national average) in 3 years you would have over $11,000 in 4 years over $15,000. This is plenty of money to buy a decent used car.
- Maintain your current cars. Frequent oil changes and routine maintenance prolong the life of your current vehicle. Prevention is cheaper than repairs. The longer you are able to drive your cars the more money you can save towards your next car purchase.
- Do not upgrade your vehicles until it is necessary. We were planning on keeping our two vehicles forever, but with baby #7 coming soon, we needed a bigger vehicle to hold our whole family.
- Buy used. This does not mean you need to buy a 10 year old car (although that is fine too). According to statistics, cars depreciate between 20 to 40% in the first year and another 15% the second year. This means you could purchase a nice two year old car for up to 55% off the new car price. Since I have kids, the new cars that I have owned looked like used cars after a week anyway so why not go for the savings. We just purchased a two year old vehicle for 45% off what the original owner paid for it. This car looks new, smells new and drives like a new car.
- When it comes time to buy research, research, and research. There are several great sites for getting information on car values, Edmunds and Kelly Blue Book are two of the most popular. We were looking for 15 passenger vans so we didn’t have many choices, but our research helped us decide on features that were important to us (sliding door, remote locks) and how much those would add to the cost of the vehicle.
- Decide on how much you can afford and how much you want to pay. After looking at vans for 5 months I knew what these vehicles were selling for in my area. I also knew which ones were popular and which ones were not. When we finally found our van we knew what a fair price was for this specific vehicle.
- Use cash to help you negotiate. This was our first time paying with cash at a dealership, although I had hoped to buy from a private owner, we couldn’t find anyone selling a van we needed in our area. The process was very smooth and uncomplicated. The van had an asking price and we had a price we wanted to pay. We met somewhere in the middle. Since the van was priced below blue book value it was already very close to the price we felt was fair. We were able to negotiate some extras into the deal since we were paying cash.
Where do you stand when it comes to buying cars? Do you prefer new cars or do you drive your cars until they have to be towed to the junkyard? Do you pay cash or finance your vehicles? Feel free to discuss it in the comments but keep it friendly.