Personal Budgeting Personal Finances

How to pay CASH for your cars

Dear Z, E, and T,

(Don’t want to read? Check out the video here) Don’t believe the lies. This IS possible. You do not have to take out a loan to buy a vehicle. Your mom and I have been married 12.5 years to date and have never had an automobile loan. As with nearly everything else I will share with you, this has very little to do with knowledge and everything to do with discipline and contentment.

If you need that brand new F150, I’ve got nothing for you. There’s no secret to writing a check and paying cash for that other than a very high paying job. The average car payment today (according to google) is $381 – $530 a month. For a mere $250 a month, I can show you how to pay CASH for $20,000 vehicles. 

First off, you’ll probably start with a used vehicle in the $4,000 range. You’ll get a job, you’ll save, mom and I will help and you’ll get a used vehicle to get to / from your job and school. Keep that car when you graduate college, get a job (don’t move back here), and start saving $250 / month for your next car. Here’s how the next 8 years play out:

$250 x 24 months = $6,000 + $2,000 (sell your car) = $8,000. You’re 2 years out of college.

$250 x 24 months = $6,000 + $5,500 (sell your car) = $11,500. You’re 4 years out of college.

$250 x 48 months = $12,000 + $8,500 (sell your car) = $20,500. You’re 8 years out of college.

You’re 30 years old, driving a good used vehicle, and writing a $20,500 check to pay cash for your vehicle. It sure beats having to shell out $381 – $530 per month for a car you don’t own that’s losing value every single day. And you can repeat that every 4 years if you want.

$250 x 48 months = $12,000 + $8,500 (selling your used car) = $20,500 every 4 years.

“But I’ll pay more for repairs!” That’s a lie we believe. Trust me. Repairs, when necessary, are a lot cheaper than paying an extra $15,000 NOW for a new (or newer) car plus interest on a loan. Seriously? You think you’ll spend that much in repairs?! It’s simply a lie we tell ourselves because we want that nicer car and we need a way to justify it.

Track record: Here are the used cars your mom and I have purchased in our marriage.

in 2007, bought $3,600 1995 Grand Cherokee. Sold in 2014 for $2,000.
in 2008, bought $12,500 2004 Jeep Liberty. Sold in 2012 for $9,500.
in 2012, bought $21,500 2009 Chevy Traverse. Still driving in 2018.
in 2014, bought $10,500 2005 Jeep Grand Cherokee. Sold in 2015 for $7,500.
in 2016, bought $3,200 2001 Chevy Suburban. Sold in 2017 for $2,000.
in 2017, bought $4,000 2004 Chevy Tahoe. Sold in 2018 for $4,000.
in 2018, bought $10,000 2011 Hyundai Santa Fe. Still driving in 2018.

Observations:
1) The cheaper the car is to begin with, the less it drops in value. Mom’s Jeep Liberty only lost $750 per year in value. My 1995 Grand Cherokee over 7 years… only $228 decrease in value each year I drove it. However, mom’s Traverse, the most expensive car we’ve purchased, really took a hit each yr and is only worth about $8,000 right now probably… which is a staggering $1,900 per year in decreased value.

2) Discontentment will cost you. While we were in California I sold my 2005 Grand Cherokee in order to purchase a motorcycle (and a really cheap Suburban). I saved some money in insurance by purchasing cheaper vehicles and in gas by driving the motorcycle everyday. However, the drop in value of the Grand Cherokee in 1 year really cost me. Hanging onto it longer would’ve helped.

3) We have not had to shell out tons of money in major car repairs. We drove mom’s Traverse across the country twice plus other long road trips. We had that issue with the water pump in Denver in 2014… but there’s no guarantee that wouldn’t have happened to a new vehicle also. Remember driving the Suburban (which was 15 years old and had 231,000 miles on it) up the coast to San Francisco? No issues. Even if there are repairs, they won’t add up to anywhere near what you’ll pay for a newer car.

If you’re nervous about buying used… here are my 6 tips for buying a used car.

Bottom line… contentment and living within your means will bring tremendous peace and freedom. If you pay cash, there’s no risk of missing a payment and losing your car. Don’t spend money you don’t have just because you want a ‘nicer’ car. They drop in value every single day you own them; they’re a horrible investment. Let someone else take the hit, buy it used, hang on to it for a while, make necessary repairs, save for your next vehicle.

Love,
Dad

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