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how to buy a car with cash

How to Buy a Car with Cash

In this article I am going to discuss how to buy a car with cash. My firm belief is that most people’s retirement savings are sitting in their garage—and that is not where we want it to be! We want that money to be working hard for you to earn you an awesome way of life during your later years!

If you live in America today and own a car, you probably have a car payment. In fact, there’s a good chance that you’ve never even thought about buying a car without having a car payment. But there is another—and better! :)–way to live. And it’s to be car-debt free.

So let’s talk about how you can get out of car payments (forever!) so that you can put your money toward building your own wealth and not the bank’s! One of my favorite finance guys says (I’m paraphrasing) that the biggest automobile casualties happen on the auto dealership floor. So let’s make sure that you are not among that group anymore.

Read on to learn how you can buy your next car with cash!



How to Buy a Car with Cash: Imagine Never Having a Car Payment Again!

I know that this idea of not having any car debt is going to be completely foreign to some of my readers, but stick with me and this one piece of advice will literally change your life forever. I’m not exaggerating. The truth is, you don’t have to have a loan to have a good car. Beginning today, you can help change this trend in America and in the world.

And I’m going to teach you how to do it—how to buy a car with cash and end the cycle of car debt. It’s simple, even if it may be a little hard at first. (But I don’t think it will be too hard when you compare it to the huge benefits of being car debt free forever!)


Consider Selling Your Current Car to Get Out of Car Debt

First, if you have a hefty car payment and owe a lot on your car, consider selling it and buying a less expensive car so that you can get out of car debt more quickly. So, for example, if you sell a car that you owe $18,000 on that is worth $20,000 and you buy a little get-around car for $2,000 (the difference between what your car is worth and what you owe on it), then you can start saving up to buy a car for cash with the money that you were previously using for your car payment.

I know that you probably won’t want to drive a $2,000 car forever, but you won’t have to! (And isn’t the idea of having no car payment an amazing one? Isn’t it maybe even worth a few funny looks in the grocery store parking lot, if you decide to buy an inexpensive car with “character”?) And don’t think that you can’t drive a $1,000 to $3,000 safely and reliably. We’ve been driving our 15-year-old car (that I love) that’s worth less than $2,000 for the last 8 years, and it has been such a great car.

Once you get rid of your hefty car payment, you can start saving up to move up in car, and you can do it pretty quickly. I’ll show you how below. 🙂

Or if you love your car and can pay it off (by paying extra toward your car payments, if needed) in 18 to 24 months, then keeping it probably isn’t a bad idea. But again, once you pay it off, keep your car! And keep driving it until you can save up the money to buy your next car with cash.


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Pay Yourself a Car Payment

Once you have gotten out from under your car loan by paying off your car, you can start saving up your money so that you can be your own bank for your car purchases. That means that instead of paying the bank a car payment, you pay yourself a car payment every month. If you don’t have a savings account already set up for this, go to Capital One 360 or another bank or credit union where you can easily set up multiple savings accounts. Then you can start putting money into this account every time you get paid.

The average car payment in the U.S. is more than $400 a month. That seems crazy to me. If you can save $300 a month, for instance, from no longer having a car payment, and you’re driving a car worth a couple thousand dollars, you can buy a $5,500 vehicle in a year. (That’s by saving $300 a month for a year; $300 x 12 months = $3,600 plus the now maybe $1,800 value of the current car = about $5,500.) That’s still not an expensive car, I know, but it’s definitely one that can get you around and be safe and comfortable and all of those things.

And then by doing the same thing, you could buy a $9,000 car a year after that. (That’s $5,500 + $3,600 = about $9,000.) Do the same thing for one more year, and you’ll be in a car worth nearly $13,000, or hold on for two more years, and you’ll be in a car worth close to $17,000 after just four years of saving up and paying for your vehicles with cash. I know that the car you’re driving will depreciate a little during that time, so these numbers aren’t exact, but they are close enough to give you an idea of the amazing power of saving up and buying cars with cash.

If you want to have a vehicle that’s even nicer than that, then keep saving in this same way, and even add more to your monthly car savings fund over time. In just five years after buying your $2,000 get-around vehicle, that you bought in order to work your way out of car debt, you could be in a vehicle worth about $20,000, and you can keeping saving this way indefinitely. No more vehicle loans ever!




How to Pay for Two Cars with Cash

If you’re a two vehicle-family and you want two nice, $20,000-plus vehicles, alternate car saving—every 5 years you can buy a $20,000 vehicle (plus the value that your current vehicle still has after the five years, so potentially $30,000 or more). And of course if you feel you want to spend even more money than that on a vehicle, you could always save $400 a month or more, and build up your car savings account to be bigger or build it up faster.

Or, on the other hand, think about this possibility: What if you decided you were OK never driving a car that cost more than $10,000? So you paid $200 a month into your car savings accounts, and then with the rest of the money that you used to use for a car payment (say it was an extra $200 a month), you put it in an investment account to build future wealth (or pay for a future dream, like owning a nice boat or a motor home or cabin in the mountains or whatever you would love to have).

If you invested that $200 a month for 30 years, instead of paying it toward car payments, and you earned a reasonable 11 percent average annual rate of return, your money would grow to over $530,000! That would buy a pretty sweet . . . virtually anything that you want. 🙂

Want to learn even more ways to save on your vehicle? Read this article for 35 ways to save money on your transportation costs.



I hope that if you’ve never considered buying a nice car without having a car payment, that you’ll look into doing it now. Learning how to buy a car with cash really will change your life. Even though saving up to buy a car or make other large purchases takes being intentional and being dedicated and being disciplined, it’s worth the effort.

When you buy with cash, you keep your freedom. You control your money, instead of someone being in control of your money. And over the years, you’ll literally save tens of thousands of dollars in interest. All that money can then go to work for you building your wealth, rather than someone else’s.

I hope you’re ready to make that change! Just leave a comment and let me know if you need any encouragement or help. 🙂


Have you considered paying yourself a car payment before? Are you ready to start doing that now so that you can buy your next car with cash? Leave a comment below and let me know what you think about this idea; I would love to hear your thoughts!


Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

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