How to Pay Cash for a Car (you CAN do it!!)

Car payments are assumed these days, but they can really do a number on your budget and hinder your financial freedom.  It’s totally possible to ditch car payments and pay cash for a car.  I’m so excited to share how we did it!

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Y’all!  I’m officially a minivan mom!  For better or worse, we have joined the club.  I swear, now that I drive one, I see them ALL OVER THE PLACE.  It’s insane, really.

When people keep asking me how I like it, I’m not always sure how to answer.  Driving a minivan isn’t really all that exciting.  Don’t get me wrong, I’m so grateful, but it is a minivan.  And I sort of liked the drive of my large SUV.

But, what I am totally stoked about is the fact that our minivan is PAID FOR!

Before I jump into how we did it, let me share some details.

The van is a 2015 Toyota Sienna LE.  It had one owner and has 52,000 miles on it.  We paid $19,000 (which includes $1500 worth of taxes and fees).  I purchased it with a friend of mine (while Kev was away for 5 months in Missouri for military duty) at a local Volkswagen dealer.  And I wrote a check for it!

I don’t share these details to brag in any way at all.  I share this all with you today because I want to inspire and encourage you!  If you are sick and tired of a car payment, please keep reading.

It’s totally possible to ditch car payments forever and pay cash for a car.  If we can do it, then you can too!

HOW TO PAY CASH FOR A CAR

1. SET THE GOAL

If you’ve been reading here for long, you know that Dave Ramsey has been a huge inspiration to Kev and I.  I highly recommend his book The Total Money Makeover.  After reading it for ourselves over 10 years ago, we jumped on the financial freedom bandwagon and we’ve never looked back.

We were thrilled to pay off all our debts back in 2007, the last of which was our 2003 Toyota Corolla.  Even though we were young in our careers and Kev was back in school to get his teaching certification, we were able to pay it off a year early.

After we paid that car off, we set the goal to always pay cash for a car.  Our cars were fairly new at the time, so we figured it would be a long way off, but we still set the goal.

2. START SAVING

I wish we started saving to pay cash for a car immediately after we wrote that payoff check, but we didn’t.

It took us some time to see pay increases at work, to get used to the financial impact of owning a home, and then transition to being a single-income family once we had kids.  All the while, we kept plugging away at Dave Ramsey’s baby steps.

Once we completed baby step 3 and our emergency fund was fully funded, we started saving specifically for a newer vehicle.  We moved ahead to other baby steps at the same time, but wanted to make certain we saved for a newer car.

Put your money in a separate savings account so that you aren’t tempted to “rob” it.  We chose a Capital One 360 Money Market account because it offered a higher interest rate than the brick and mortar banks we investigated.  Capital One 360 offers a few different account options to suit your needs.

We saved anything and everything we could, whether it be tax refunds or any other chunks of money we could scrounge up.  If possible, consider auto-drafting an amount each month.  Even if it’s a small amount, it’s something!

3. DETERMINE YOUR BUDGET

Ideally, you might set your budget at the beginning of the saving process.  Our original goal was $20,000.  We thought it would take that amount of money in order to get a used car with low mileage.  (We wanted to buy used because of the drastic depreciation of new cars).

There may be times when you have to start looking for a newer vehicle before you reach your ideal goal.  That’s okay!  In that case, your budget will be based on the cash you have available to spend at the time.  I definitely don’t encourage you to dip into your emergency fund for this either.

Don’t be discouraged if it isn’t as much as you’d like.  If you pay cash for a car now and then continue saving, you can upgrade to something better later!

With Kev’s blessing (again, he was away in Missouri when all of this happened), I decided to start looking for something more reliable in June.  Once it was time to buy, setting our budget was fairly straight forward.  We had $19,000 saved, so that’s what our budget became!

4. RESEARCH, RESEARCH, RESEARCH

Buying a car can be overwhelming, but there is a lot of information out there to help you make a more educated purchase.

Research which makes/models are reliable.  Check Consumer Reports, talk to your friends, or even reach out to a knowledgable mechanic who can give you some inside scoop.

Think about what your needs are and what types of vehicles make the most sense for your stage of life.

Once you have an idea of what you need in a vehicle, then it’s time to research prices.  AutoTrader and CarMax are a great place to start if you are looking for used cars.

I realized quickly that a van made the most sense for us.  I wanted to purchase another Toyota Sequoia, but when I realized that I could get a minivan with half the mileage for the same price, it made no sense financially.

Seeing what is out there will give you a better idea of what you can actually get for the money you have to spend.

When you’ve seen some specific vehicles that interest you, review Kelly Blue Book.  This will help you determine whether the asking price is realistic.  On the flip side, this information will help you to understand what would be a realistic offer to make on a car that interests you.

And don’t forget to research the CarFax report on any vehicle you are seriously considering.  It will help you to know how well maintained the vehicle is.  You’ll have to spend a little money to pull the report, but it is money well spent for a vehicle that you are seriously considering.

5. BE PATIENT

Don’t rush!  Take your time looking online and in person.  It’s a big deal to pay cash for a car, so don’t let anyone cause you to make the purchase lightly or too quickly.

I spent a lot of time looking online (ex. AutoTrader, Facebook Marketplace, eBay, dealership websites, etc.) before I looked at anything in person.

I had a bad experience at the first place I visited.  Since Kev was out of town, I took a friend of mine from church who had a lot of experience buying cars.  He even said that the way we were treated was probably the worst he’d ever experienced!

For a split second, I was tempted to lay my concerns aside because I thought the van was promising.  But, I didn’t feel good about it and decided to move on to other places.  I was thankful for that decision because we found the car I eventually purchased just a couple of days later!

Even if you don’t see many options right away, the right car will eventually come along.  I prayed that God would bring the right car along at just the right time, at the price that I needed….and that is exactly what happened!

6.  STICK TO YOUR GUNS

The most intimidating part of purchasing the van was the negotiation process.  I’d heard horror stories about pushy sales people and I dreaded it!  Thankfully, my friend had a lot of experience and he guided me during this part of the process.

Prior to test driving the van I purchased, I researched (see #4) and knew that the price was a little higher than Kelly Blue Book price. (Shocker!)

I also knew what I had to spend was less than the base price of the car, so the dealer was going to have to take less if they wanted my business.  It was that simple.

I made my offer, which was $2000 less than the list price.  They did not accept it and came back with a counter offer.

My friend and I reiterated that our offer was firm, we thanked them for their time, and then began to stand up to leave.  Within a few minutes, I was signing the documents to purchase the car!

Sticking to your guns (and budget) can be awkward with the song and dance of car sales people, but it’s worth it!  If you think you might feel tempted, then bring someone along who will help you to be firm!

7.  SAY NO TO ADD ONS

After the brief back and forth of the negotiation, I thought the rest would be smooth sailing.  I was wrong!

The next phase was with the financing department.  They knew I was paying with cash, but I still had to hear about all the warranties they had available.  I politely declined them all, much to the shock and horror of the lady behind the desk!

I chose the make and model because they are reputable and I know a good mechanic, so I felt confident that the warranties were not necessary.

What to do with the old one?

Any money you get for the vehicle you are replacing helps offset the cost you are spending, so don’t just accept any price for it.

As I expected, the dealer where I bought only offered me $500 for our 2001 Toyota Sequoia.  Despite its age, I know it is worth more than that.

Personally, I’d recommend selling it privately.  Yes, it will take time and effort, but that money can either go towards to the purchase of the newer car or can be set aside in order to start saving for the next car!

We are still in the process of selling the Toyota Sequoia, so I’ll keep you posted on how that goes!

my friend was a huge help in this process!!

It was such a great feeling to drive away from the dealership without a car payment.  And it was amazing to receive the title in the mail just a few weeks later!

Don’t believe the lie that you must finance cars.  You CAN stop the cycle with some intentional saving and buying what you can afford with cash!  We were able to pay cash for a car, so you can too!

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If you are interested in more on living without debt, you can check out some of these posts:

• Our Journey to Debt-Free Living
• Our Family of Five Living on a Teacher’s Salary
• 4 Benefits of Using Cash

Would you like to pay cash for a car?

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