- 1 How to Pay Cash For Your Next Car- Even On a Low Income
- 2 How do you make an agreement to take over car payments? #used #car #loans
- 3 3 Steps You Can Take To Pay Cash For Your Next Car
How to Pay Cash For Your Next Car- Even On a Low Income
Let’s face it, cars are expensive. Most of us need at least one car, and if you have a family, sometimes it can be hard to get by unless you have two. But when you have a low income, buying and maintaining vehicles can put a huge dent in your budget. In this article I’ll show you that you can pay cash for your next car, even if you have a low income. In fact, if you follow what I teach in this article, you will never have a car payment again!
Let’s get started…
If you’re like most people, you have a car payment. The goal here is to totally get rid of your car payments and never go back. But when you don’t have a lot of money, how can you do that?
If you’re living on a low income, it’s difficult to save enough money to pay cash for a car. However, being able to pay cash for a car is not as much about money as it is about strategy. Here are several things you can do to get the job done and never have a car payment again!
One of the most important things to consider when you want to start paying cash for your cars is that you have to get over the mindset that says you have to have a car payment. Car payments are not a necessity, even in today’s economic environment. Anyone can drive paid for cars if they want, but most people think they can’t afford to do it. When you have the right knowledge and put it into practice, paying cash for a car is really not that hard.
When I buy a car, my goal is to drive it until it has at least 250,000 miles on it. My last vehicle was a Jeep Grand Cherokee that finally died at 320,000 miles!
The longer you drive a car, the more time you have to save to pay cash for the next one. You don’t have to have a different car every couple of years to be happy. That’s the kind of mindset that gets you into trouble and keeps you in bondage to your car payments year after year. I drove that Grand Cherokee for 13 years before it died!
While you still have a car payment, if you can afford to put any extra money back for your next car on a regular basis, do it. Even if you can only save $20 a month it’s better than nothing. Obviously more is better, but with a low income you may not be able to do much, if anything at all. But if you can save some extra money, this puts you ahead of the game when it comes time to trade or sell your old car.
If you can find a way to make some extra money to save toward your next car, do it. That way, when it’s time for your next car, you may be able to pay cash for the entire amount.
I think brand new cars are for suckers! Brand new cars are expensive, and they lose a lot of value very rapidly. There are plenty of reliable, affordable used cars that can serve you well for many years.
Don’t fall prey to peer pressure, pride, or marketing that says you need to buy a brand new car. That’s what broke people do. You can find a good car at a good price without resorting to a smoking heap of metal with a bad paint job.
I’m a perfect example. Even though I make a very good six-figure income, I drive a 13 year old car. It’s actually a very nice used Lexus that runs like a top and gets me around town in style. The best part about that car is that it’s paid for!
When You Pay Off Your Car, Put That Money in the Bank
Once you get your car paid off, put your car payment in the bank to go toward your next car. Don’t treat it like found money and start spending it on other stuff.
If you make the effort to start putting that money in the bank once you’ve paid off your lender, you will have enough money to pay cash for a nice used car in 2-3 years. If you drive your car until the wheels fall off, you can easily pay cash for your next car.
You may only be able to save a little before you need your next car. If that’s the case, buy the cheapest car you can, drive it for 6 months or a year while you’re saving more money, then sell that car and use the proceeds to upgrade to a better one along with your saved cash. Do this two or three times in a row, then you can pay cash and be driving in style in just a couple of years, without a car payment!
It takes time to save enough to pay cash for a car. Be patient and keep working your plan, you will get there eventually. If you can only save enough using these techniques to pay for half of your next car, you’re still ahead of the game compared to most people. Keep working at it, keep saving, and you’ll be able to pay cash for the next one.
About three or four years after I bought that Jeep Grand Cherokee, Angie and I decided to get serious about our finances and get out of debt. Part of that process was getting rid of our car payments. We had two car payments at the time, and made a pact to drive both of those cars until they had at least 250,000 miles on them.
Once we got those cars paid off, we were diligent about putting those car payments in the bank. Since then, we’ve paid cash for all of our cars and don’t miss those car payments in the least.
This stuff actually does work if you stick with it!
Even with a low income, paying cash for a car is not as much about money as it is about having a strategy. Most people end up with a car payment because they don’t have a plan.
When it’s time to buy a car, lack of a plan and no cash forces you to make the only choice you can “afford”. The cycle of car payments continues, and because of that you always owe money to the bank, spending more than you should because of interest and fees.
Here’s the deal, if you can pay a car payment, you can pay cash when you have the right plan.
Question: Did you ever let lack of a plan force you into getting a car payment? I know I did! Leave a comment and tell me how it worked out for you.
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I have been saving to get a new car for my wife, but I have a good idea for purchasing two new vehicles: After I save up enough to pay cash for one car, I will sell my wife’s old car and my pickup truck and use that money as a down payment on a new truck for myself. My wife and I will split the truck payment. This way we will each have half a payment, but we will have two new cars.
Definitely sounds better than having 2 car payments. Why not just save a little longer and pay cash for the second car too? Zero car payments is even better!
Good idea, but I’m not sure our old cars will last long enough for me to save up that much. It’s taken me almost four years to put back $40,000, and most of the cars we like are in the $50K range (after taxes). We bought our car and truck (Acura TL-S and Toyota Tacoma) new back in 2003 for $36K and $30K.
Wow, it’s great that you’ve been able to save up that much money for vehicles! Of course, I recommend buying used vehicles, which will save you a lot of money. Keep saving until each car dies and buy cars that are 2-3 years old for MUCH less than new. We bought our first cash car for about one third of original retail.. It was a 2003 Infiniti that retailed for $55-60,000 and we bought it in late 2005 for $21,000.
Good advice. Lately, it seems like everyone wants new car prices for their used vehicles. For example, there are many 2011 Ford pickups with 50,000 miles on them that are listing for $8,000 less than 2017 models. At first I thought it was just dealers that were asking pie-in-the-sky prices, but there are literally hundreds of trucks currently advertised for similar prices – so apparently that’s what they’re actually selling for.
Great advice! I am so grateful for my car, it was a gift from my Mimi for graduation, an ’02 PT Cruiser with 44,000 miles. Now, two years later, I only have 68,000 miles and I plan to drive it until it dies.
Question: Do you have any advice for saving for a used RV? I am wanting to move into an RV full time (stationary, no traveling for now) and I don’t want to have a loan hanging over me. I have no debt and I want it to stay that way!
Thanks Allison! It’s awesome that you have a paid for car! Just make sure you’re saving up money for the next one so you can pay cash when the PT Cruiser dies.
As for the RV, your best bet is to save up and buy a used one for cash. Just like a car, they drop in value like a rock, so buying new and/or taking out a loan is not a good idea. The good news is, there is always someone needing to get rid of an RV, so there are good deals to be had if you’re patient and shop around.
We had 4 paid-for older cars which we meticulously maintained. The mileage on them ranged from 90,000 to 150,000 miles; their age was 9-14 years. We had a separate “new car fun” and also a “vehicle maintenance fund” and thought we were on track. Well, 3 of the 4 needed extensive repair work on them, mostly due to some chemical put on the roads (in CT) to melt the snow. This chemical is well known to eat & rust the undercarriage and brake lines. We were going to have to pay over $10,000 cash to fix these vehicles (one of them a 4WD truck) and this was after we had just spent $3000 on 1 of them.
None of the vehicles was worth the money needed to keep them running. Also, it was getting to the stage that more money needed to spent to keep them running. Though we didn’t have nearly enough in the “new car fun”, we bit the bullet….traded in the 3 vehicles (ironically, keeping the oldest which had the most miles) and purchased 2 brand-new vehicles. My husband’s insistence and against my better judgement. And got 2 car loans in the process.
After 30 years of marriage, I have learned to pick my battles. We agreed on the course of action re paying off the loans. I went back to work, with my paycheck only being used to pay for the cars. Goal is to have the 5-year (0% interest) loans paid off in 2 years.
That was over a year ago. For a year I regretted getting 2 vehicles, instead thinking that I could have used the 15-year old vehicle. Well, I am now glad we didn’t do that! We just spent $750 on it and a week later the brakes went on it. We are in the process of donating it to our town, who will use it after they fix the brakes. The repairs/upkeep won’t cost them nearly as much as it would cost us because they have mechanics on staff to maintain all town-owned vehicles.
I gues this too-long post (sorry!) is confirmation that sometimes the best-laid plans get sidetracked. And by managing our money, we are able to ride the tide and come up with alternate plans/approaches.
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You are so right about the first, hardest, and most important step being about the mentality of not having a car payment. When hubby and I paid off our car loans, we vowed never to have one again. We are down to one ’98 truck for our family and are praying that we get many, many more miles on it. For us, it doesn’t make sense to save for another vehicle until our (small) mortgage is paid off due to the interest we spend each month on that (even though it is relatively low). Our goal is to become completely debt-free and then we will start saving our old mortgage payments towards a replacement vehicle. Thanks so much for your encouraging blog! We need these articles, so please keep them coming! May God continue to bless your family for all that you do.
Thanks so much for the kind words! I think it’s a good idea to make sure you have some amount put back for your next vehicle now just in case it dies before you get the mortgage paid off. You don’t want to get stuck in a difficult position and be forced to go without a vehicle or get a car payment.
That is an excellent point. We do have an emergency fund in place that should cover the cost of any needed repairs. Do you think that is sufficient, or do you still recommend a separate vehicle replacement fund?
I like having a separate vehicle fund. Once we paid our cars off, we just put our car payments in an account and let it build.
Makes sense. Thanks!
Good and thorough post Jason. These strategies DO work! Two of our cars are over 10 years old and they still run great and we still love them.
Most cars are made so well these days that it’s not hard to get 250,000 miles or a decade or longer out of one. You just have to be willing to drive the car even after you get tired of it and want a different one. Most people don’t do that.
It takes a lot of discipline to do that, but we really need to decide what is most important in our lives. For us, it isn’t driving nice vehicles, but becoming debt free. It is no fun being slave to the lender. While driving nice vehicles makes you feel good, if it comes at a high price, it takes the joy out of it. Thanks for the post!
The blessings of the Lord have no sorrow attached. Being a slave to the lender is definitely not a blessing in my book! That’s why I pay cash for my stuff now.
How do you make an agreement to take over car payments? #used #car #loans
#take over car payments
How many car payments can be missed before repossession?
In some states, the loan company can seize a car as soon as a payment is missed according to the Federal Trade Commission. The number of car payments that can be missed depends on the purchaser’s credit history and the loan company’s policy on repossession.
How do I make payments on a home equity loan online?
Many banks and financial services companies allow consumers to make payments on home equity loans online. Bank of America customers can log in online to use the Bill Pay service to pay home equity loans, states Bank of America.
To make bi-weekly mortgage payments, a borrower pays half of his monthly mortgage payment every 14 days instead of the full mortgage payment once per month. Borrowers can pay their mortgages this way by mail, online or through automatic bill-payment systems. Because there are 52 weeks in a year, bi-weekly payments result in 26 half-mortgage payments, the equivalent to 13 monthly mortgage payments.
3 Steps You Can Take To Pay Cash For Your Next Car
Do you have a car loan? You might be surprised at just how many people do. Why? I think it’s because we are a society that is used to getting things immediately. Most of the time this can result in a family taking on something like a car loan. Can car loans be avoided? Yes, it is possible and here’s a few reasons why you should:
- They typically have high interest rates.
- They can have high payments if your credit score isn’t high enough.
- If you miss one payment, your credit score is affected and you may risk a repossession.
However, paying for your next car in cash is an awesome choice. There is no interest to worry about, it belongs to you right away, and you’ll even earn a bit of cash in interest while you wait to get your new car! I don’t know about you, but anytime I can make my money earn more money, I’m game.
So are you sitting there now thinking it sounds great, but it’s too hard? Really, it’s not. It’s actually quite simple to do, especially if you were already looking at taking on a car payment to begin with. I would recommend that you have a separate savings account if possible unless you are 100% sure that you will not spend the money that you’re saving for your new/used car.
3 Steps You Can Take To Pay Cash For Your Next Car
Determine how much you want to spend on your next car and whether you want to buy new or used. Buying new isn’t recommended simply because you lose so much of its value the moment you drive it off of the car lot. However, if you’re going to buy used, be sure to plan for enough cash to buy a quality used vehicle. You will also need to have an idea as to how long you can wait to replace your current car. In this case, the longer you can wait, the better.
In your budget, you’re going to create a new category called…ready for it? “Car Payment.” I know, I know. You’re trying to pay cash for that car and now I want you to budget for a car payment? Yes, but remember you would have a car payment anyways if you took out a car loan. This “car payment” is a lot less and won’t last as long. Once you’ve got the new category set up, pull out your trusty calculator and divide the amount you’ll need by the total amount of months you can wait. For example, if you want to have $10,000 saved and you need to replace your car in 24 months, you would dive $10,000 by 24 to get $416.67.
Now take your newly calculated amount and add it to your “car payment” budget category. That is now your monthly car payment. Each month you will “pay” your car payment to your savings account. At the end of your time period (whatever length of time you chose), you will have enough cash saved (plus some interest!) to pay cash for your next car!
See? That wasn’t so hard! Now I know finding a surplus of income in an already tight budget might be difficult, but there are several ways you can start increasing income and decreasing expenses:
This is a great way to teach yourself discipline and to avoid taking on new debt. The other plus side to buying a car this way is that if you truly have a family emergency or loss of job, you can simply put off saving for a month or two until things straighten back out. However, don’t make a habit of doing that or you’ll never buy your car!
What are your thoughts on car payments? Do you try to avoid them? We haven’t had a car payments in several years and hope to keep it that way for a very long time!