Buying a Car With Cash (Take 2)

It’s kinda weird when you stop and think about it. How many American’s actually own their cars? Most people slowly purchase ownership in their cars month after month as they make payments. By the time the car is paid for 3-6 years later, the car is worth a fraction of what they just finished paying for it. Vehicles are probably the second largest purchase that we make in our lives next to buying homes. They are also the biggest purchases that we make that lose value so rapidly.

This makes the idea of a paid for vehicle incredibly appealing. Not only do you completely own your car, but you free up a big extra chunk of income that you can put towards every day living. So why is it that so many of us feel mired in an endless cycle of car payments when driving a paid for vehicle makes so much more sense?

Two weeks ago, my wife and I bought a car. Yes, we BOUGHT it. We decided that it was time to move from having two very small cars to one very small car and one medium sized car to make hauling people and stuff easier. Here are the basic steps we followed so that we could pay cash for the car.

1. Both of our vehicles were paid for. We have had no car payments for some time now and that has freed up our income so that we have more money going into our bank accounts each month. That means once we paid off our two vehicles, we effectively gave ourselves a $600/month raise. That $600 gets divided up between spending, investing, and saving. Part of that saving is to have the cash on hand when the time comes to buy another vehicle.

2. Know exactly what kind of vehicle you want. My wife and I had a specific type of vehicle we wanted. It had to seat six-seven people and could not be a mini-van or hulking SUV. It had to be used and have fairly low miles. We are fortunate to live an area with a glut of cars of all shapes, sizes, and prices so even with our rather tight parameters, there were many options. Keeping your scope narrow will help you avoid the pitfall of “upselling.” Anyone who has done any type of selling knows what I am talking about and most of us have probably fallen victim to it in everything from restaurants to copy centers to car lots. At one dealership, a salesman tried to convince my wife and I that what we really needed was a mini-van instead of the vehicle we were on the lot to look at. Thankfully, we had already set in our minds what we wanted in a vehicle so the upselling tactics only resulted in the salesman getting dirty looks from my wife and I (I have to say, the man had guts to even suggest a van to a pair of twenty-somethings. People my age are notoriously anti mini-van).

3. Shop around. Autotrader.com is an excellent resource for finding a car because it lets you search in incredibly broad or incredibly focused parameters. The 2007 Honda Fit that we bought last spring was found as a result of a search on Autotrader that covered a 300 mile radius from our zipcode. If you are truly hunting a bargain, don’t be afraid to search far outside of your immediate area. A five or six hour drive to save a few grand is not a huge sacrifice to make in my book.

4. Shop your trade. With both of our vehicles paid for it meant we could trade in a vehicle and apply the entire value to the purchase of the new vehicle. It’s a good idea, before you walk onto the lot of the dealer who has a car that is likely to be the one you purchase, to have a quote from somewhere else (as well as the Blue Book value) just in case they try and low-ball your trade. My wife and I were fortunate in that the dealer we bought our vehicle from actually offered us more right off the bad than the quote I had received on the trade-in from another dealer.

5. DETAIL YOUR TRADE-IN. The day before we traded in our vehicle, I took it and paid fifty bucks to have a basic detail done to the outside and inside. We take good care of our vehicles, but sometimes apartment living is not conducive to keeping the inside and outside of the car sparkling. The detail made the car look great and revealed that we took good care of the vehicle. It can only help you if you show up on the lot with a clean trade-in and not one that smells like old Taco Bell gorditas and has moldy french fries under the seat.

6. Matain the power to backout of the deal if it is not going how you want. It is easy to get wrapped up in the process and before you know it, you are paying more for the vehicle than you intended. This is not nearly as big of an issue since you will be paying cash. You will know exactly how much money you have in your checking account and that tells you how much wiggle room you have to haggle. When my wife and I bought the car, we told the dealer what we were willing to pay in terms of the difference between the trade and the vehicle we were buying and then we let the salesman go back to the secret room that every dealership seems to have where he asked his manager if he could make the deal. The dealer ended up coming out on the high end of our comfort zone, but it was still within the parameters that we had set beforehand so we took the deal.

7. Pay attention to the details. When we bought the car we wanted to make sure the dealer included two keys. Buying an extra key FOB can be an expensive proposition. We also tested both the key FOBs and realized the batteries in both were dead so we had the dealer replace the batteries. Those are things that should be included in the purchase of the vehicle but that you might not notice until after you get the vehicle the home.

So there you have it. I’m sure advice on buying cars is a dime-a-dozen, but how many people do you know in there mid-twenties that have two (fairly new) paid for cars? For the first two years of our marriage, we dealt with car payments. Now that we have experienced life without them, we refuse to ever go back. I wish that more people could experience the freedom of not having a car payment. All it takes is the discipline to pay off the cars you currently have and then the discipline to only buy cars you can afford to pay cash for. With your paid for vehicles you will be a freak of Americna culture but secretly all your friends with the shiny new cars will go home at night and wish they knew your secret to not having any car payments. It’s cool being weird.

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