Buying a Car with Cash: the "How To"

Photo credit.

As you can see from my previous cash post, I have become a huge fan of cash purchases for a multitude of reasons, which you can read about right here.  After posting this morning about buying a car last weekend with cash, I thought I would share a little bit more about how we did that.

I mistakenly said that we saved for a year for this vehicle, but when I stopped to really think back, I realized that it was actually about two years.  We were not always awesome about saving, so we had to make up for slacking off by saving even harder toward the end.  At any rate, here is a summary of our car story.

In 2005, less than a month before we tied the knot, My Stud and I bought a 2002 Hyundai Elantra with 19k miles on it.  Only concerned about whether or not we could afford the monthly payments, we later realized we paid way too much for it.  However, we worked diligently to pay it off in about 2 years.  Time passed, and we enjoyed the life of driving a dependable car without a payment.  Then we began to realize that as our family grew, we would want a larger vehicle with more seating.  Otherwise, we'd drive that little car to the ground. (I can't say enough about what a wonderful, dependable car it has been.)  The wheels began to turn in our minds.

Largely following the inspiration from this Dave Ramsey video (yes, we loved Dave Ramsey long before we ever took the Financial Peace University class), we began to "pay ourselves" a car payment each month as a way to save up for a vehicle.  Unlike the video, we used an old fashioned savings account rather than a mutual fund since our savings would be relatively short-term.

A quick note on the video:  if you love the idea of this strategy but saving over $400/month is completely out of the question, then I would encourage you to save what is reasonable for you.  $150 or $200 per month.  It will take longer, but that will add up too!

We plan to drive our Expedition for about 5 years.   Built into our budget is a savings plan for car repairs.  Our main focus at this time is paying off the rest of our student loans, which should take another year or two.  We can't decide if we should start saving for our next vehicle now (something small-ish like $150/month  $50/month) or wait until our loans are paid off first and then dedicate a larger amount to car savings at that time.  I'm leaning toward starting now just so we stay in the habit of setting *something* aside for it, but we shall see what my  husband thinks.  I try to defer to him on these matters.  Anyway, for those who were interested, that is the basic concept of how we did and how we will continue to buy vehicles with good old fashioned cashola.

I hope this inspires you to always be planning ahead for your transportation as well.  Happy saving!