The common procedure, when it comes to buying a car, is to finance it. Paying cash for a car is just for those crazy wealthy people, right? Wrong! You can do it too. Just like I did. Here’s how to buy a car with cash, in six steps.
I drove the same car for twelve years. This in itself is unusual, given that the average length of time drivers keep a new vehicle is 6 years. So when the time came that it didn’t pass inspection, and the repair would cost far more than the value, I knew it was time to say goodbye and buy a new-to-me car.
The most popular advice from my friends and family was to lease a new car, or to “just take out a loan.” The fact that our family has made the decision to NEVER borrow money, doesn’t seem to make much sense to those we know. We understand – it makes us weird.
Why Shouldn’t You Just Take Out a Loan?
The average car payment in the US is $525 for a new car, $378 for a used one, and $431 to lease, according to a 2018 study performed by Experian. If you invest $500 a month in good mutual funds with a 10% interest rate, you’ll have over a million dollars in 29 years.
Your Car Payment is likely preventing you from retiring a millionaire.
The year I had to admit I needed a new car, the frame of my Subaru Forester was rusted, the head gasket was leaking, the check engine light was continuously on and off, and there were ants (yes, ants!) climbing around the interior. At one point I drove my car to work and back for two weeks with a loud rumbling noise. I thought the muffler had a hole in it. One day I ended up on the side of the road with a missing wheel. The lug nut had broken off the tire. Oops! I literally drove the wheels off.
How to Buy a Car with Cash
1. Save Money
First, you’ll need cash. Duh!
Obviously in order to purchase a car with cash, you’ll need to save the money. Feeling as if you can’t possibly save that much money? Living paycheck to paycheck? Don’t panic. You can totally do it. Here’s how to buy a car with cash.
If you want to buy a $5,000 car, you’ll need to save $500 a month for 10 months. That’ll be enough to get you started with your first cash car.
Remember, you don’t need to drive this car for life. You can always save more money, then sell the first car you bought, and trade up in car if you want. All you need is some patience and time.
Moving up in Car with Cash
After you buy your $5,000 car, you can drive it for 10 months, while you save another $5,000, and then SELL your $5,000 car to buy a $10,000 car. Drive THAT car another 10 months, while you save another $5,000, and then sell it to buy a $15,000 car. In the end, only two and a half years later, you’ll be driving a pretty decent (paid for!) car.
2. Set a Budget
How much money have you got? It’s critical that you have a set amount of money in mind that you want, or can, spend on your new car. If you don’t tell yourself (in a stern voice) that you will only be spending “x” amount of dollars, you’ll likely get talked into taking out a loan on a car you can’t afford to pay for. We definitely don’t want that!
3. Do LOTS of Research
Before you run out to a dealership, be sure they have cars in your price range that interest you. Before I decided to purchase my car, I searched Craig’s List, dealership inventories, and even called family members to see if they were selling a car in my price range.
Research, Research, Research and then… do MORE research to be sure you’ve explored every option, and are buying the best car at the best price.
4. Tell The Seller You Plan to Pay CASH
Cash is rare these days. Especially when it comes to car buying. If the seller knows you have the money, they’re likely to give you a lower price. You’re a “sure thing” when it comes to being able to PAY. This is valuable to the seller. There’s nothing worse than spending a ton of time showing a car to a potential buyer only to find out they can’t get the financing they need to purchase it.
5. Be Prepared to Walk Away
I think most people know this. If the car or the price doesn’t feel right, be ready to leave without a car. This is what helped me save $500 on the car I bought. I thanked the seller for his time, and had my purse on my shoulder when he decided dropped the price.
6. You DON’T Really Need CASH
Wait…. what?! Isn’t this the point of this blog post?
When I bought my car with “cash” my biggest anxiety was how the actual exchange of monies would take place. Did I need a suitcase filled with fifty dollar bills? The answer is, no. In fact, I wouldn’t recommend it.
If you’re buying from a dealership, they’ll accept a personal check. From their perspective, it’s fraudulent to write a check that won’t clear, and you’ll simply be arrested if your check doesn’t clear and you don’t return the car. Why would you do that?
Depending on how expensive your car is, you might even be able to pay with your debit card. There are often limits on how much you can run through the machine, so you’ll have to ask.
If you buy your car from a private seller, you can get a money order from your bank. Have the seller meet you there for extra security.
