Buying a car with cash

Posted on October 22, 2013

I bought a car this week with cash.

And it feels really good.

I hesitated to write about this, because I don’t mean to brag. In fact, I bought the car five days ago and have been debating with myself about blogging or not. Please don’t think I’m trying to show off. All I want to do is share why I think saving up and buying a car with cash is better than financing a vehicle.

Here are my reasons:

1 – The borrower is slave to the lender. If hard times come, I never want to worry about being unable to make the payments and risk the car being repossessed. I’ve sworn off debt.

2 – Financing a vehicle costs more. Interest adds up. Example: A $26,000 vehicle at 9.6 interest rate winds up costing $33,000 after six years of payments. I’d rather not pay $8,300 in interest. Watch this really interesting youtube video about it.

3 – A practice in contentment. Sure, a brand new car with all the special features would be nice to own, but I don’t really need that.

It took us a few years, but my husband and I saved up the money. We had a special “car” savings account at our bank. We’ve been driving beat-up cars. And it was worth it.

Car payments do NOT have to be a way of life.

The average car payment is about $400 a month. If you “pay yourself” instead of paying the bank – and save that amount each month for three years, you can pay cash for a $14,400 vehicle.

The second piece of advice about car-buying: don’t ever buy new. Buy used. Depreciation causes new cars to lose 70 percent of their value in the first four years. A car loses about 25 percent of its value the moment you drive it off the lot. Let someone else eat that cost.

MY PROCESS

I’m not an expert at car-buying. This was my first experience purchasing a vehicle. But if you’re interested in my process, here is what I did:

1) Tuesday – Found out from my mechanic that my car’s engine was almost expired. Knowing it might fail at any moment and not wanting to be stranded on a busy Houston highway … and also knowing that replacing the engine on such an old vehicle would not be worth the expense … my husband and I decided to finally make the car purchase that we had been delaying. I’ve been driving my 2000 Toyota Camry for over a decade and put 211,000 miles on it. I guess it was time to say goodbye.

2) Wednesday – Researched vehicles online. I found cargurus.com to be really helpful. I wanted a compact crossover SUV, and I narrowed my field to the Nissan Rogue and Toyota Rav4. Through looking online I found out how much those vehicles were going for at different mileages and years, and I saw photos of cars for sale near my zipcode. My husband and I decided we wanted a used vehicle made in the last four years with under 40,000 miles. I wrote down addresses of dealerships that I might want to visit with cars I was interested in. I had a price limit in my mind, but I knew it would be tough to find what I wanted within my budget.

3) Thursday – I drove to a dealership and test drove four vehicles. I liked two of them, but the salesman gave me a price several thousand higher than I thought it should be. The whole process at the dealership took about three hours. It was quite long and tiring. While talking with the salesman, I looked at my iphone and saw an awesome deal for the kind of vehicle I wanted listed on cargurus.com, and I showed the price to the salesman. He said he did not believe that the price and car actually existed. He said some dealerships will do a bait-and-switch just to get people onto their lots. I thanked the salesman for working with me – he did, after all, patiently allow me to drive several cars – and then I left. I immediately called the place that had the good deal I saw on my iphone. It was almost 5pm, but they were located near me and said I could come take a look at it. It had recently been a “certified preowned vehicle” so I knew it was in good shape mechanically. And that is the car I bought.

My 2010 Nissan Rogue SV has 25,000 miles.

Let’s just say I got a really good deal. It was already several thousand dollars below the “instant market value” and I negotiated, getting it for less than it was listed.

I quickly drove to the bank before its 6pm closing and got a certified check. Even the guy at the bank asked me why I was not financing. I said I did not like debt! Then I went back, signed all the paperwork, and was handed my keys.

I probably would not have bought a car on the first day that I looked except for the fact that I knew I would be hard pressed to find a better deal. I had done enough online research to know the correct price range, and visiting the dealership confirmed that fact. Besides, I am too busy to spend much more time searching for a car.

SPECIAL FEATURES

When picking a vehicle, I just did not care about special features. The guy at the dealership kept pointing out how wonderful it is to have heated seats, backup cameras, a GPS system, and a sun roof. But I kept telling him I cared less about those things and more about the price. In my mind I knew I had a certain amount of cash, and that was what mattered. I’m a simple girl when it comes to cars.

Here are the features of my Nissan Rogue that I am especially excited about … It shows that it doesn’t take much for me to feel like I am driving a huge upgrade:
• Automatic (My Camry was a manual, and driving in Houston’s stop-and-go traffic is such a pain with a manual!)
• Cruise Control (On long road trips I have longed for cruise control.)
• Keyless entry (Just keep the key in your pocket and press the button on the handle and you gain access. Ta da!)
• CD player that doesn’t skip (And my new CD player holds 6 CDs at once… whoa!)
• Higher crossover-SUV build (You don’t have to bend over as much to get in a compact SUV as you do a car. And this is important to me because some day I’ll have a baby and want to get the child in and out easily.)

I strongly urge everyone to start saving money now and pay for a car with cash. It is a great feeling.


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