Buying a car in cash is something many just don’t get. For some people, it boggles their mind that someone could save between $8,000 and $15,000 to purchase a car. It might even sound ridiculous to some who has never done it.
However, I have borrowed money for a car and I have paid cash. Trust me when I say – there is no comparison.
Before we go any further, some might be thinking, “You can’t get a new car for $8,000!” Yep! You are right. However, you can get a very nice used car for that amount fairly easily.
Reasons Buying in Cash is Smarter
- It is usually cheaper (meaning you get a better deal when you have the green stuff in your hand)
- It is paid for and done! No more worries about making that dreaded car payment.
- If something unexpected happens in your life (like some kind of emergency that effects your job) you won’t have to worry about that car payment because there isn’t one.
- Paying cash for a car is empowering and makes you feel like you have truly accomplished something!
Here are 6 Ways to Save For Your Next Car or Large Purchase:
- Have more taken out of your check each month in taxes than is needed.
You will end up with a tax return and this could go towards your car fund.
I know, Dave Ramsey doesn’t like for us to have more taken out than necessary and I totally understand where he is coming from and his reasoning. I don’t do this because I am very good with money and am always saving for Roth accounts and other types of investing. However, if you are struggling to save, then this is a great way to force you to save!
Set it up where you have an additional $150 each month pulled out of your check for taxes. If you are paid twice a month that is only $75 each pay period! This becomes an automatic savings account for you. At tax return time, you will have an extra $1,200 for savings – or for that car!
Yearly savings: $1,200
- Decide to not go out to eat for 30, 60 or even 90 days OR – go big and do this for an entire year!
Here’s the catch though, each time you want to go out to eat, would have gone out to eat OR it just sounds fun to go out to eat – STOP! Instead, don’t give in to temptation! Figure out what you would have spent on dinner, pull it out in cash and SAVE it! You might be surprised how much you save over 90 days’ time.
Let me give you a tangible example here – the Average American family goes out to eat 4 to 5 times each week. Just in case you’re not average I will take that number down a bit – let’s take it down to 2 times each week with the expense being around $35 for each meal. That is $70 a week OR $3,640 each year! Yikes! That is a lot of money!
Yearly savings: $3,640
- Once your existing car is paid off – keep paying yourself that same amount.
The average new car payment in the US today is $515 a month and for a used car is $371. So, once you pay off your car – you keep saving the average of those two payments – or about $400 a month. In one year you would have $4800 in 2 years you would have $9600! That is a nice chunk of change in one to two years.
As a side note here – I have bought 4 cars in cash since 2010 and there is nothing like it! My daughters are doing the same thing here very soon. It is the absolute best way to go!
Yearly savings: $4,800
- Starbucks no more!
The average bill at Starbucks is around $5. At my house, we call Starbucks “5 bucks” for this very reason. It is coffee folks! That is WAY too expensive for coffee!
Instead of driving to the coffee shop, standing in line, and almost being late to work – why not get your coffee at home?
You’ll save $5 a day – times 20 days a month (most people only work 5 days a week) and that will add up to $1,200 by the end of the year to go towards your new/used car OR super fun purchase. Not bad for just cutting coffee!
Yearly savings: $1,200
- Change in a jar.
Smirk all you want but this works! Instead of counting coins to finish out a cash purchase, keep the coins and throw them into a jar. I have done this for the last several years. I restart in January and I now know that if the jar reaches the top, it is about $250! That is like a Christmas bonus for us! It used to take an entire year to get to the top but seems to have filled up faster this year. Probably because I throw more and more change in there to beef it up!
If you are saving for a car this would be a super easy way to get rid of heavy change in your purse or pockets. Re-purpose it for something you really want or something that you need.
Yearly savings: Approximately $250
- Dollar bills each day.
At the end of each day take out only the $1 bills in your wallet that are left over from your daily spending. Put these in a jar that you DO NOT spend for an entire year!
If you averaged $2 (give or take a little bit) a day for the entire year that would total $730! Not bad for a few bucks a day.
This is something you can start TODAY! You don’t need another checking or savings account to do this and you don’t need a written plan. Just designate a jar and get started!
Yearly savings: Approximately $730
There you go! $11,820 by the end of the year to go towards a new/used car or for another large purchase you have in mind.
The point is to just start saving! It takes a bit of effort and a little time to retrain your brain but after a few weeks or months, it becomes a habit. A very good habit!
Share in the comments other ways you have saved money for a car or other large purchase.