Buying a car is a big ticket item, and in most parts of the country it’s necessary to have at least one car per household to get to work, school, shopping, and more.
For many people, it’s just a fact of life that you’ll have a car loan, same as you have a mortgage. However, while a house (usually) appreciates, a car starts depreciating the second you drive it off the lot.
Do you really want to take out a loan on an asset that’s losing value? But, it’s impossible to pay cash for a car, right? Not necessarily.
But, unless you are blessed with a cash windfall, you’ll need to use these 5 tips to save money to pay cash for a car.
If you have a current car loan, pay it off as quickly as possible
If you don’t have any higher interest rate debt (like credit card debt), start paying extra towards the principle on your car loan to pay it off more quickly. Check with the bank to make sure there are no penalties for paying it off early.
Pay your old car payment to yourself
Once you have your car paid off, keep making your payment, but transfer it directly into your savings or money market account to use for your next car. Don’t use this money for any other purpose.
When you need to replace your car, use the amount you have in cash as your budget for the car (not as a down payment). If you only have $10,000 saved up, only buy a used car priced at $10,000 or less.
Also check out: 5 Tricks to Save Money when you Buy a Used Car
Reduce expenses or get a second job
Or, you could get a second job to earn some extra money for a period of time. Any extra money you stumble into, can be added to your car savings to help you get started.
Drive your car until the wheels fall off
My husband and I keep our cars as long as we can until they start needing lots of expensive repairs (that cost more than the value of the car). We’re excited that our cars should last longer in Texas since we no longer have to deal with the Michigan winter road salt and pot holes destroying our cars more quickly.
Do you pay cash for your cars? Do you have any tips to share how you do it?
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