Here is a plan to pay for a car in cash. This is an action plan that can work.
There is nothing worse than a car payment. Just imagine what you could do with that money every month. Put extra in a rainy day fund, fund your retirement plan a little more or even take a nice vacation. I hate the idea of debt and the idea of paying someone more than what you are borrowing.
Here is a plan that I am actually implementing right now that can work.
The goal is to not have a car payment, right? How does one actually do this? I mean a car can be expensive and not everyone is blessed with a big bank account. Cars these days can cost $25,000, $35,000 and maybe even more! That means when you get another car, pay for it in cash instead of getting help from your best friend, the bank.
Here is my plan of how I will be paying for my next car in cash.
First, in my situation I have a car I just paid off (it is a great feeling). Thus I do not have any monthly car payments. Just the usual insurance and taxes on it. So, instead of me having to pay so much money to a bank every month (principal and interest!), I pay myself that same amount and have it earn money for me.
Where do I put the money? I put the money in a savings account with an interest rate so I can earn money on what I put into the account. Interest rates these days are not the best but at least it is something that I am getting a return. The key though is to not touch the money but let it grow in a safe conservative type of a savings account (no risky investments such as stocks).
The best part? Every month it keeps on building (and compounding).
Second, continue saving for an amount of years (you determine that) that you think your current car will last. I know I have another good 7 or 8 years left. Thus if I save the same amount of money every month in the savings account for the next 7 or 8 years, I will have enough saved up in cold hard cash to buy another car.
Third, keep track and see how much money you will have saved by tracking in an Excel spreadsheet. This can be easy to set up and allows you to see if you are on track.
Sounds awesome, right? I know that a lot of people would think that with no car payment that would be just extra money to blow every month. But just think that car won’t last for years and years and you need to figure out a plan to get another one.
And lastly, pick out that new car! So at the end I will have enough money to buy another car and not have to take out an auto loan (that is the best part – I hate debt). Ok, so maybe I won’t be able to buy the most expensive car but I should still have enough saved up to get a pretty nice car. And if I want to get a more expensive car, I would have enough saved up for a really nice down payment.
So, remember, paying yourself is far better than paying a bank.
What do you think? Would it work for you?