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kkmcan
08-04-2006, 11:18 PM
I would love to be able to save a set amount each month towards a new car which we will need in a couple of years if not sooner. How did you buy your new car with cash?

Saving up a certain amount each month? Buying a cheaper used car? Paying yourself a car payment until you had enough? Need some ideas on how to get started on this.

I hate having car payments and we haven't had one in a year so I don't want to end up back there again.

TIA,
Kelly

MrsPete
08-04-2006, 11:39 PM
Buying a cheaper used car?
Paying yourself a car payment until you had enough? Combination of these two tactics.

We had to finance our first couple cars, but we kept driving them until they were literally dead. Our minivan kept going two years longer than we thought possible; we worried about it a bit, and we had to put some money into small problems occasionally, but essentially we had two "free years" that we didn't expect to have -- that was a great opportunity for us to get ahead. We resisted the temptation to "trade up" after a few years. Once the car was paid for, we continued to "pay" into a savings account, which we used for the next car.

We also drive cheap cars. Neither of us is really a "car person"; it's just not our thing, so it's not really a sacrafice for us not to drive something shiney and sporty. Don't get me wrong: New cars are great -- I just can't grasp the idea of spending a year's salary on something that could be wrecked in an instant.

One of our cars is near death right now. Our long-term plan is to buy a 2006 Honda Civic (we're waiting for the 2007s to come out, hoping for a good deal), which will be my car -- hopefully -- for the next six years. When my daughter heads off to college, a six-year old, one-owner Honda will be a great college car for her. It'll be paid for and inexpensive to maintain.

sk!mom
08-04-2006, 11:42 PM
We always buy good used cars. They have all been about a year old with only 10 to 12,000. We then drive them until they become a maintanance problem- this has typically been at least 10 years.

To get started, we saved the car payment that we had been making after the car was paid off. We have just continued that strategy. We are frugal by nature so paying cash has probably helped us keep a car longer. When faced with laying out that much cash (even when it has been saved) we seem to put it off as long as possible.

pearlieq
08-04-2006, 11:49 PM
We set aside a certain amount each month for future car purchases. It should be enough to cover my next car, but I'm also putting extra money in so we can cover DH's as well. Eventually we should have enough to perpetually replace them on a set schedule.

peanut12392
08-05-2006, 06:34 AM
Combination of these two tactics.


One of our cars is near death right now. Our long-term plan is to buy a 2006 Honda Civic (we're waiting for the 2007s to come out, hoping for a good deal), which will be my car -- hopefully -- for the next six years. When my daughter heads off to college, a six-year old, one-owner Honda will be a great college car for her. It'll be paid for and inexpensive to maintain.



We have a 2006 Honda Civic and just love it. It replaced my 1992 Accord with over 280,000 on it. (That Accord is still running for the person we gave it to!)

ohiominnie
08-05-2006, 07:19 AM
I need to do this. When we first got married we drove a used, paid for car. (bought off of relatives) Then we got "rich" working with no kids and bought a brand spanking new car (well, only *I* was working, dh was getting "cost of living" expenses via school loans!.) :earseek: We've bought a new car about every 3 years since then. And, when finances were too tight to BUY a car.....yes, horror of all horrors.....we leased.

Our excuse was that we needed a good, DEPENDABLE car for driving around in....ESPECIALLY once we had kids. Must get them where they need to go and get them there safely.

I've been listening to Dave Ramsey now for about 3 weeks and reading through his book. I cannot believe how STUPID we were. We now have an SUV (paid for through my dh's office---it comes out of his kitty, but *I* don't see the bill) and a 2005 Camry which I love. We'll be paying that off early and I can definitely see me driving that for many years to come.

ducklite
08-05-2006, 07:36 AM
Figure out approximately how much a monthly payment for the car you think you'd like would be, and put that amount into a savings account every month. If you already have an idea of what type of car you'd like, get a credit card for that manufacutrer to start earning points towards the downpayment.

Keep in mind that if the dealer is offering a 0% interest loan, it can sometimes be beneficial to finance and keep you cash earning interest. I did this when I bought my ION.

Anne

nbodyhome
08-05-2006, 08:27 AM
Part of the money we are spending towards DH's truck payment (which ends within a year) will go towards a car for me. My car is 94K miles, but may get a few more years if no accidents, etc. (maybe more than that). I'd really rather pay completely in cash for a newer car if I can.

txtink17
08-05-2006, 09:34 AM
This is what you do:
You save $100 a week ($400 a month) for 10 months, then buy a used car for $4000 cash. You do that again for another 10 months, so that you have $4000 again. You sell your car for $4000, remember it hasn't depreciated much, you've only been driving it for 10 months. Take the car money ($4000) plus the money you've saved ($4000) and now you have $8000. Kia sells a small car brand new for $7900, or you can get another used for $8000 cash and save another $4000 in 10 months, then you'll have $12000 for a new car. The whole process takes only 20 months for an $8000 car or 30 months for a $12000 car, still much shorter than a car loan (4+ years) plus there's no interest or fees. You just pretend like you have a car payment.

CJMickeyMouse
08-05-2006, 09:34 AM
We only buy when they have the 0% interest deals. So basically you are paying cash - just not in advance. If you have money in the bank, I agree, let it stay there and earn interest and finance the car. That just makes it a better deal!

badblackpug
08-05-2006, 09:42 AM
I did the same. I bought my Honda Accord cash. I have the advantage of being able to pretty much get overtime at my job any time I want (I am a nurse) I just picked up an extra shift each pay period and set that shifts pay aside. I don't buy used cars, I figure somebody got rid of it for a reason!

dvcgirl
08-05-2006, 09:57 AM
I did the same. I bought my Honda Accord cash. I have the advantage of being able to pretty much get overtime at my job any time I want (I am a nurse) I just picked up an extra shift each pay period and set that shifts pay aside. I don't buy used cars, I figure somebody got rid of it for a reason!

People get rid of "used" cars for lots of reasons, many times they are gently used leases. Many times they simply can't afford the payments. You can get a killer deal on a used car is you shop around. A new car depreciates roughly 20-25% in the first year! And so, if I can get a car with 10-15K miles on it at a 20% discount...why not!? Even better, give me a car with 20-25K on it for a 40% discount on what original buyer paid. We buy cars and keep them forever anyway, and so 20K miles is nothing when you plan to keep it for another 180K + miles.

neatokimmo
08-05-2006, 10:13 AM
This is what you do:
You save $100 a week ($400 a month) for 10 months, then buy a used car for $4000 cash. You do that again for another 10 months, so that you have $4000 again. You sell your car for $4000, remember it hasn't depreciated much, you've only been driving it for 10 months. Take the car money ($4000) plus the money you've saved ($4000) and now you have $8000. Kia sells a small car brand new for $7900, or you can get another used for $8000 cash and save another $4000 in 10 months, then you'll have $12000 for a new car. The whole process takes only 20 months for an $8000 car or 30 months for a $12000 car, still much shorter than a car loan (4+ years) plus there's no interest or fees. You just pretend like you have a car payment.

txtink17, that is a great plan! :thumbsup2

I didn't have cash to buy my car straight out but I did make it a big priority to pay it off fast (its was around 1.5 years). Then that money went into the house and now its going into savings. Once you get rolling with cash for things it just seems easier. Be sure to check out brands you might normally not like Hyundai. My Elantra (bought new, I keep cars a long time) is about 12K now and its been a great car.

Kim

MyGoofy26
08-05-2006, 10:21 AM
People get rid of "used" cars for lots of reasons, many times they are gently used leases. Many times they simply can't afford the payments. You can get a killer deal on a used car is you shop around. A new car depreciates roughly 20-25% in the first year! And so, if I can get a car with 10-15K miles on it at a 20% discount...why not!? Even better, give me a car with 20-25K on it for a 40% discount on what original buyer paid. We buy cars and keep them forever anyway, and so 20K miles is nothing when you plan to keep it for another 180K + miles.

I bought my car used one year old and can't imagine buying new. Granted it is nearing the end of it's life, and it's "only" 7 years old. .. but a few years of commuting an hour and a half each way for class put a LOT of wear and tear on it. It has nearly 130,000 miles and just recently started having little things go wrong. I think I can get another year out of it.

You're exactly right - it's not just problems why someone gets rid of a car. People tend to get a little ambitious when buying cars so they get in over their heads and buy more than they can afford, or they simply realize they don't like the car they bought. A lot of dealers buy at auction, so you get the bank repo's for the people that got WAY in over their heads. Most of the used cars on the lots are there because of previous owners' financial mistakes, not because of faulty mechanics.

ceecee
08-05-2006, 11:17 AM
My Ford Windstar has been a maintenance problem since year 3 and we bought it new. We thought of paying for it outright but with the 0.5 financing they offered we put the money we had saved onto the mortgage and paid it off. We like to drive cars forever too and with our Oldsmobiles this worked well, but this Ford is another story. Everytime we take it in for repairs it's over $600.00. (Two times in two months most recently!). The service guy even told us "we have some great deals on a new one" like I would buy another Ford with the problems we've had? It's 5 years old and I doubt it will get to 10. It only has 68,000 on it. Our Ninety Eight has 120,000 (DH drives 50 miles a day to work and back) so we will soon be looking at car payments again.

barbeml
08-05-2006, 11:19 AM
I bought my last car two years ago for half price and paid cash.

I was an original GM Card holder. When GM offered a $4,000 rebate two summers ago, I was able to combine it with $3,300 in GM Card earnings plus a dealer discount and a trade in. I paid $11,000 cash for a car with a sticker of $22,000.

Since I kept my previous car 7.5 years but kept paying my car payment into my savngs account once the loan was paid, I had more than enough to pay cash.

Even though we paid cash for our last two cars, we keep making two "car payments" into our savings each month.

staceyfe
08-05-2006, 11:29 AM
Yes, we also are putting a set aside amount away every month. We eventually got rid of car payments by living frugally and paying extra toward the car loans. At the beginning of this year, I decided we better start saving for when we do need a new car.

Question to the 0% buyers: Don't you think the 0% is really factored into the bottom dollar of the car? I'm all for the 0%, but if I can get the car cheaper by foregoing the 0%, I'd rather do that and pay cash. I'm not sure how salesman/sales managers respond to cash buyers. Generally, they will make money on the financing, so I'm not sure how to best negotiate w/ cash. Any car dealers out there have tips for this?

DiznEeyore
08-05-2006, 11:41 AM
Question to the 0% buyers: Don't you think the 0% is really factored into the bottom dollar of the car? I'm all for the 0%, but if I can get the car cheaper by foregoing the 0%, I'd rather do that and pay cash.
In our case, I don't think it was factored in. I have a Saturn Ion -- Saturn has bottom-line pricing, and the 0% was only for a limited time, so I don't think anything was "added" to the price to compensate. Plus, we got my brother-in-law's Saturn discount, so it was a great deal. I love my car, and it's worth quite a bit more than we owe on it.

We plan to drive it 'til it stops (hopefully at least 5-7 more years!) and since it will be paid off in 2, make 3-5 years' worth of "payments" to our savings account to save up for our next car. :thumbsup2

CEDmom
08-05-2006, 11:57 AM
DH bought his car with cash last Sept. We generally live well below are means so with a great trade-in he was able to pay the balance in cash. We've since bought a new house so our cash reserve isn't what it once was. I'll need to get a new car in the next year or so. We'll likely have to finance part of it. However, once DD goes back to school in a few weeks and we don't have camp costs I'll start putting $ aside each paycheck.

prgirl
08-05-2006, 02:13 PM
let me tell you a story:

I had my 1992 toyota paseo since 1996, I bought it secon hands just because that was the car that I wanted, going to college and not much money on my pocket still a cute and fast car. I changed it recently this year in january because it never had a/c system and here in PR is always sweaty and hot, plus I was moving on with my life so I figured I had to let go off him too :crazy: Big Mistake.In the dealer they gave $2000. for the car plus some savings I had I bought a 2003 Kia Rio, since I had some good references. I was not looking for luxury but for something that last at least the same years the old one did.Let me tell you the old one never left me on the road I just changed the basics. when I went to the dealer the next day my old car was already sold :sad2: I came out the dealer crying instead of happy. My "new" car,well I don't have too many options right now, let's say it's new but not beloved.

ZipaDeeDooDah
08-05-2006, 02:29 PM
This is what you do:
You save $100 a week ($400 a month) for 10 months, then buy a used car for $4000 cash. You do that again for another 10 months, so that you have $4000 again. You sell your car for $4000, remember it hasn't depreciated much, you've only been driving it for 10 months. Take the car money ($4000) plus the money you've saved ($4000) and now you have $8000. Kia sells a small car brand new for $7900, or you can get another used for $8000 cash and save another $4000 in 10 months, then you'll have $12000 for a new car. The whole process takes only 20 months for an $8000 car or 30 months for a $12000 car, still much shorter than a car loan (4+ years) plus there's no interest or fees. You just pretend like you have a car payment.

Brilliant plan! :thumbsup2 You would just have to make sure you made good/smart purchases with those first few cars (ie. ones that resell fairly easy, are reliable, run well, etc)

pilgrimage
08-05-2006, 03:03 PM
I second the advice to buy used and keep it forever. I am still driving
a 92 volvo wagon, bought at 3 years old for $13,500. It has almost
230,000 miles and runs great. I change oil more frequently than
required (3500 not 7000 miles), but it is serving me very well. This has allowed
me put money back "pretend car payments" in a special account for
newer one.

MrsPete
08-05-2006, 03:43 PM
We only buy when they have the 0% interest deals. So basically you are paying cash - just not in advance. If you have money in the bank, I agree, let it stay there and earn interest and finance the car. That just makes it a better deal!Did you have to pay sticker price to get the 0% interest deal? There has to be a catch somewhere -- businesses don't just give things away.

MrsPete
08-05-2006, 03:47 PM
People get rid of "used" cars for lots of reasons, many times they are gently used leases. Many times they simply can't afford the payments. You can get a killer deal on a used car is you shop around. A new car depreciates roughly 20-25% in the first year! And so, if I can get a car with 10-15K miles on it at a 20% discount...why not!? Even better, give me a car with 20-25K on it for a 40% discount on what original buyer paid. We buy cars and keep them forever anyway, and so 20K miles is nothing when you plan to keep it for another 180K + miles.We've bought our last two cars used, and we've been very pleased. Both had very low mileage -- I think one had 11K and the other had 14K. I suspect they were leased cars that were only kept a short time.

We've decided to buy a new car this time. Why? We've decided that we want a Honda Civic, and we're finding very few low-mileage/used Civics out there, and the price is very, very close to the price of a brand-new model. This has not been true of the other vehicles we've bought; in the other cases, buying used has shaved off a significant amount from the price.

EthansMom
08-05-2006, 03:47 PM
I know a lot of folks here on the Budget Boards like buying their cars new, but DH and I prefer to buy an affordable, reliable car new, keep it well maintained and drive it forever.

We put aside $$ every month toward the purchase of our next new car -- we used the Debt Snowball Method to pay off our car loans early and then started saving the amount of a car loan payment every month in our savings account.

My first car was a Honda Accord that lasted 9 years and I only replaced it when it started having an electrical short that 3 different mechanics couldn't locate. I replaced the Honda Accord with a Toyota Corolla. I did my homework on the internet and knew what price I should pay and bought the baseline model with no bells or whistles (not to mention the high markup on the bells and whistles). The Toyota Corolla is 8 years old and still going strong.

Any time DH or I start feeling that we'd like that "new car smell", we spend a day detailing our current cars: vacuum, steam clean, and clean the interiors, and wash, degrease, and wax the exteriors. You can even buy an air freshener that smells like "new car". After spending a day detailing, our cars look great and we're good to go.

MrsPete
08-05-2006, 03:51 PM
I'm not sure how salesman/sales managers respond to cash buyers. Generally, they will make money on the financing, so I'm not sure how to best negotiate w/ cash. Any car dealers out there have tips for this?I'm a champion haggler, and I refuse to discuss financing, trade-ins, or monthly payments with the salesperson. They are experts at double-talk, and they can mislead you with these figures. There's only one number I want to talk about with the salesperson: The price of the car -- that is, the total price: taxes, tags, everything.

After I know the price of the car, THEN it's time to talk about trades, etc.

barbeml
08-05-2006, 04:13 PM
After I know the price of the car, THEN it's time to talk about trades, etc.

Absolutely. We got the price in writing before we mentioned GM earnings, trade in or cash deal.

We also got a satellite radio thrown in for free.

RoyalCanadian
08-05-2006, 04:33 PM
This is what you do:
You save $100 a week ($400 a month) for 10 months, then buy a used car for $4000 cash. You do that again for another 10 months, so that you have $4000 again. You sell your car for $4000, remember it hasn't depreciated much, you've only been driving it for 10 months. Take the car money ($4000) plus the money you've saved ($4000) and now you have $8000. Kia sells a small car brand new for $7900, or you can get another used for $8000 cash and save another $4000 in 10 months, then you'll have $12000 for a new car. The whole process takes only 20 months for an $8000 car or 30 months for a $12000 car, still much shorter than a car loan (4+ years) plus there's no interest or fees. You just pretend like you have a car payment.

Sounds like it will work -- but it won't. Here's why:

1. The $4000 retail price for the car will depreciate over the course of the 10 months. You're driving the car. You're causing wear and tear to the car. The car will be another year older in relation to its model year. The car will depreciate. This is a very simple and easy to understand reality of the marketplace.

2. The trade-in value of that $4000 car will be, in fact, closer to $2500 -- and that is if you were to trade it in the same day as you paid $4000 for it. Car dealers make money by purchasing cars for less than they sell them. This is another very simple and easy to understand reality of the marketplace.

3. Let us not forget that a car for which one might pay $4000 retail is a car that is well past its peak and a car that will require significant, ongoing maintenance. Nobody should view buying a $4000 car with the intent of trading it up to a $12000 car in less than 3 years without paying more than $12000. This is yet another very simple and easy to understand reality of the marketplace.

I'm sure that somebody's "Friend Of A Friend" has done this. Show us the receipts and then maybe we will believe.

RoyalCanadian
08-05-2006, 04:38 PM
let me tell you a story:
for the car plus some savings I had I bought a 2003 Kia Rio, since I had some good references.

The two words Kia Rio made me feel sad for you immediately. Ever since getting stuck with a 1996 Plymouth Neon (with complimentary "biodegradable" head gaskets) I have been a solid supporter of the Phil Edmunston publication "The Lemon-Aid Guide". It is a must-read for anyone considering a new or used vehicle.

Phil rated Kia as a company to avoid when purchasing a vehicle in the early years of this decade. Since their takeover by Hyundai they are making a much better product, to the point where some of their cars are selling better than equivalent Hyundai models. Kia now gets good reviews from Phil Edmunston.

mjbaby
08-05-2006, 05:05 PM
We typically buy old cars that might be high mileage but are well-built and which have good reputations for being long-lasting, and pay cash. Right now we have a 1992 Mercedes...something, I can't remember the model, with 190,000 miles, a 1992 Volvo turbo wagon with almost 300,000 miles, and a 2001 VW Passat that we bought when someone traded it in in 2003 for a BMW, with 82,000 miles. Of these, the Passat gives us the most trouble, but even that isn't too terribly much. And the Mercedes is a classic creampuff - prior to us it was a single owner car, owned by an elderly woman who had all the scheduled maintenance done at the dealership exactly on time.

Luckily, my husband is pretty clever about automotive stuff - something of a Car Whisperer. Like I said, we don't have tons of problems and he looks each car over verrrrrry carefully before we buy it. Still, when you drive older cars you need to be prepared for the occasional outage - which is why we almost always have three cars at a time. They're all inexpensive to insure, easy to obtain parts for and the three of them didn't cost us north of $18,000. So, we figure for the price of one new car (and not even a terribly nice one), we got three.

Next we've been looking at the same model Volvos for when the time comes to get another "new" car. While we look around, we stash $200 a month in our special interest-bearing "car account". Since we're not in a hurry we're taking our time. When the time comes to buy we'll pay cash from the account.

Barak's Disney
08-05-2006, 08:16 PM
We have established various funds (bank savings accounts) that we deposit a set amount of cash into every month so we don't have to use credit for big ticket items - Destination Disney :cool1: and New Car 2010 are two of our funds. Also, we aren't big car people, so a 2 year old used car that we drive to death is fine by us!

StitchandPooh'sMom
08-05-2006, 08:42 PM
We buy new cars and pay cash, but we keep them for five years or more. When we get close to needing a new car, we start adding to our emergency fund (which also doubles as our "major purchase" fund) by increasing our payroll deduction and adding "found money" to the account (tax returns, cash back from DH's credit card, gifts of cash we receive, pay raises, bonuses, etc.). We don't buy a car until the amount in our emergency fund is increased by the amount of the car we want - we won't dip into the "emergency" part of the account! DH's car is five years old but only has 67,000 miles on it. It should be good for a while, unless he gets the new car bug!

byoung
08-05-2006, 09:12 PM
The last 2 cars we paid cash.

barkley
08-06-2006, 09:19 AM
My Ford Windstar has been a maintenance problem since year 3 and we bought it new. We thought of paying for it outright but with the 0.5 financing they offered we put the money we had saved onto the mortgage and paid it off. We like to drive cars forever too and with our Oldsmobiles this worked well, but this Ford is another story. Everytime we take it in for repairs it's over $600.00. (Two times in two months most recently!). The service guy even told us "we have some great deals on a new one" like I would buy another Ford with the problems we've had? It's 5 years old and I doubt it will get to 10. It only has 68,000 on it. Our Ninety Eight has 120,000 (DH drives 50 miles a day to work and back) so we will soon be looking at car payments again.

don't base your opinion of fords on the windstar. we've owned an aerostar, and own a mustang and have never had the problems we had with our windstar (i truly think they 'enjoy' visiting the mechanics). i recently traded my 4 year old one in and bought an escape based on our past experience with other ford products. before i was considering getting rid of it i talked with a ford mechanic and he conceded that there were lots of problems with the windstars and he saw them in on a far more regular basis than the majority of models (esp. with regards to that stupid 'low tire pressure' light-i swear, if a mosquito landed on the tire it went off!!!!).

the issue i've got with used cars is the 'unknown' factor regarding any problems someone may have had with it. it might be a great value initialy but if i have to go without it for days on end it's going to cost me allot in time and convenience as well as whatever the repairs run (i know someones going to think they are getting a great deal when they buy my old windstar from the dealer-4 years old and less than 50K miles, spotless inside and out. until they drive it past the repair shop, it gets 'homesick' and starts clunking, sputtering or making 'mystery sounds' that never seem to reoccur once they it was in for servicing :rolleyes: ).

Stein
08-14-2006, 02:51 PM
Sounds like it will work -- but it won't. Here's why:

1. The $4000 retail price for the car will depreciate over the course of the 10 months. You're driving the car. You're causing wear and tear to the car. The car will be another year older in relation to its model year. The car will depreciate. This is a very simple and easy to understand reality of the marketplace.

2. The trade-in value of that $4000 car will be, in fact, closer to $2500 -- and that is if you were to trade it in the same day as you paid $4000 for it. Car dealers make money by purchasing cars for less than they sell them. This is another very simple and easy to understand reality of the marketplace.

3. Let us not forget that a car for which one might pay $4000 retail is a car that is well past its peak and a car that will require significant, ongoing maintenance. Nobody should view buying a $4000 car with the intent of trading it up to a $12000 car in less than 3 years without paying more than $12000. This is yet another very simple and easy to understand reality of the marketplace.

I'm sure that somebody's "Friend Of A Friend" has done this. Show us the receipts and then maybe we will believe.


Nobody said anything about trading them in to a dealer. The idea is you sell them in the paper, on Craigslist or whatever to get retail. So a $4000 car may sell for $4000, or very close to that. A $4,000 car purchased intelligently simply doesn't depreciate $1500 in one day as you mentioned, or you made an extremely stupid purchase.

Even if you loose $500 by selling it, the plan still works, it just takes a month or two longer.

The internet has so much information, you can get accurate prices and also find out how reliable cars are, how much they cost to fix and any other info you need to make this work.

For example, kbb lists a 1995 Civic in excellent shape for $4,635 with 91k miles. This car has at least 100k miles left in it. If you drove that for 6 months, you would likely be able to sell it for $4,100 or so, then buy a more expensive car.

Personally, I would keep it for 2-3 years and not buy and sell so many cars. If you saved $300 a month for 3 years, you would have $11,652 plus two grand for the car, so you could buy a $13,000 car cash. $13k would get you an extremely nice 2 year old car that you could drive for many years.

TnTWalter
08-14-2006, 03:13 PM
of the depreciation factor...and if they don't think it's a wise financial move, I sure as heck don't! That's from the book 'The Millionaire next door'. It's a great book, easy read and very informative.

I'd rather buy a good 1-2 year old car and OWN it then get a '0%' deal on a car that depreciates the moment you drive it off the lot. Even though Hondas tend to hold value better than others, they still lose initially.

If I was a millionaire it would be more tempting, but I'd probably then rather buy a really expensive 1 year 'used' car.

Also, you don't typically get a good deal on a trade in; it's best to sell them on your own if possible. So TXTINK17's plan will basicall work, give or take. Plus you're EARNING instead of paying interest on the $$ you're putting away each month and the car has already mostly depreciated in value. We put our money in an ING account that averages about 4% annual interest.

Currently we are putting about $500 a month into a truck fund. When it gets to $20K AND DH's '94 truck finally gives out, we'll buy a 'new to us' truck for him ['03 or later].

My '00 Windstar that we also OWN and really like has several more years of life in it. So, we're going to keep putting $500 into a fund for my next vehicle.


Trish :thumbsup2

JudicialTyranny
08-14-2006, 03:47 PM
Did you have to pay sticker price to get the 0% interest deal? There has to be a catch somewhere -- businesses don't just give things away.
Many times with the 0% financing, you have to take that instead of a cash rebate. And it's not always for the standard 5 years - you have to look at the fine print. It may be 0% for 4 years and 1.9% for 5 years or something like that.

For example, if the car is $30,000 and they have a 0% rebate or $3000 rebate, you have to decide if you want to pay $30,000 over the life of the loan or apply the rebate and pay $27,000 and finance it for whatever interest rate you can get (from the dealer, bank, home equity loan, etc.)

There are calculators out there on the web that shows when you should take the rebate vs. financing deals.

It should have nothing to do with the price you pay for the car. It's difficult, but keep the rebate/financing out of the negotiations. The salesman will keep trying to put it in, but you have to keep your eye on the number towards the top - sticker minus discount, before rebate/financing.

Check the sites like edmunds.com and kbb.com and find out the invoice price for the car or the "what others are paying" number and use that as your benchmark. Don't forget - the dealer makes money even if you pay "invoice" price.

Also, as another post mentioned, I have a GM credit card that earns 5% towards the purchase of a GM car (Chevy, GMC, Cadillac). I have an original card that has fewer limits - the newer cards have earnings usage limits depending on the type of car you purchase. But it's still a good deal if you can predetermine that you will buy a GM car. I got $2500 off the cost of my truck using the GM Card earnings, in addition to the discount they gave off the sticker plus $4500 rebate. Adding those three up, it was close to $10K right off the top.

CowboyCO
08-14-2006, 05:10 PM
Many times with the 0% financing, you have to take that instead of a cash rebate. And it's not always for the standard 5 years - you have to look at the fine print. It may be 0% for 4 years and 1.9% for 5 years or something like that.

For example, if the car is $30,000 and they have a 0% rebate or $3000 rebate, you have to decide if you want to pay $30,000 over the life of the loan or apply the rebate and pay $27,000 and finance it for whatever interest rate you can get (from the dealer, bank, home equity loan, etc.)

There are calculators out there on the web that shows when you should take the rebate vs. financing deals.

It should have nothing to do with the price you pay for the car. It's difficult, but keep the rebate/financing out of the negotiations. The salesman will keep trying to put it in, but you have to keep your eye on the number towards the top - sticker minus discount, before rebate/financing.

Check the sites like edmunds.com and kbb.com and find out the invoice price for the car or the "what others are paying" number and use that as your benchmark. Don't forget - the dealer makes money even if you pay "invoice" price.


I am a 5 year vteran of the car business and IMO 0 percent is only a good idea only if you would truly want to buy the car even if they weren't offering the incentive AND if you intend to be a long-term owner and make every single payment before selling/trading. You need to remember what incentives really mean-- this is not a popular model. If people wanted to buy a Ford Taurus new, they would without being paid to do it... Think about it A Pontiac G6 that stickers for $23,000 in 2006 has a wholesale book of $13,000 one year later. That means you can buy a used G6 for $14-15,000. It would take about 28 months to save up that much cash if you sock away $500 a month and then buy one used.

Never buy a domestic car new-- they will depreciate up to 50 percent in one year. Hondas and Toyotas are good to buy new because their first year depreciation is as low as 5-10 percent. You may notice that Honda and Toyota NEVER offer 0% financing-- Why? They don't have to.

I am not a domestic hater -- I think The Pontiacs, Chevy's Ford's and Dodges are good deal at 50 percent off--and are good cars. But, if you like buying new, Honda and Toyota won't lose as much money over time for you. I had a Toyota T100 4x4 pickup that I bought new for $18,000 in 1995. I drove it for 11 years and put 189,000 miles on it. I sold it in one hour after listing it on Ebay for $6,500. The only money I put into it was tires, oil changes, tranny flushes, two timing belts, one water pump and regular brake servicing. Plus I got an average of 20 MPG. Try that in a Silverado!

I have the hardest time trading people out of their domestic vehicles that they bought with 0% financing. They owe way too much, even though they paid no interest. They just paid too much!

disykat
08-14-2006, 05:35 PM
Sounds like it will work -- but it won't. Here's why:

1. The $4000 retail price for the car will depreciate over the course of the 10 months. You're driving the car. You're causing wear and tear to the car. The car will be another year older in relation to its model year. The car will depreciate. This is a very simple and easy to understand reality of the marketplace.

2. The trade-in value of that $4000 car will be, in fact, closer to $2500 -- and that is if you were to trade it in the same day as you paid $4000 for it. Car dealers make money by purchasing cars for less than they sell them. This is another very simple and easy to understand reality of the marketplace.

3. Let us not forget that a car for which one might pay $4000 retail is a car that is well past its peak and a car that will require significant, ongoing maintenance. Nobody should view buying a $4000 car with the intent of trading it up to a $12000 car in less than 3 years without paying more than $12000. This is yet another very simple and easy to understand reality of the marketplace.

I'm sure that somebody's "Friend Of A Friend" has done this. Show us the receipts and then maybe we will believe.

I think you're wrong. #1 - The car depreciates quickly when it is new, but not very quickly later. Quite a few years back I sold a used car to a neighbor the day I put a sign in the window for $2000, (which was a fair, blue book price) and he sold it two years later for $2000 (which was still listed as a fair, blue book price).

#2 Nobody with this plan should be trading in - you never get full value that way.

#3 I agree that for someone who rides a car hard or doesn't know much about car maintainance, this might be a bad plan. But someone who needs a car for basic around town driving for that brief time can probably find a well maintained older car. In my case, the only reason we sold that car to the neighbor is that our family size had increased. My neighbor had done his research and realized I was selling a car that had been listed in consumers digest as best used car of the year. He also knew my reputation for taking care of things.

I think this could be a very smart move, especially if you put the word out that you're looking for a good used car to drive for a short time. It may be you'll find someone who was planning on trading in - tell them you'll pay them over trade in price, and be able to cash in!

JudicialTyranny
08-14-2006, 06:04 PM
#2 Nobody with this plan should be trading in - you never get full value that way.
In general I agree if I am squeezing pennies, but if I look at the new car purchase as a total transaction (sticker minus discount minus rebate (if any) minus trade-in) vs. how that same transaction might be without the trade-in (selling it myself) and the two are fairly close, I'm going for the trade-in.

I realize I'm not getting top dollar for the trade-in, but there is value to me in the dealer taking on the "pain-in-the-a** factor" of me trying to sell the car myself. I just don't have time to deal with it sometimes.

tzvdmd
08-14-2006, 06:09 PM
Save, save and then save. Although I must say we bought a Toyota Matrix and we are not happy with it at all. The car has a ton of rattles and sometimes it wont start when it's hot. A couple of the compartment on the dash fall open while driving. :furious: We had a Buick with 280,000 miles on. Maybe we should have gotten another.

CDN
08-14-2006, 07:59 PM
I worked with a another teacher who got married late in life and decided to have a child late. She had a new 2 door Chevy Cavalier and it had been used very little, in mint condition. She didn't want to drive a 2 door while pregnant and certainly not when the baby was born. She wanted 2000.00 bucks for it, cash. I jumped at the chance and I am so delighted. I had been driving a Honda Accord that was beyond the graveyard. I think I did very well for myself. Too bad this was a once in a lifetime opportunity!

MEM
08-15-2006, 07:38 AM
I bought my first new car in 1985 and paid it off in 1987. I continued to put the $200 a month payment away and 11 years later when I had a husband and 2 kids, we bought a new Ford Windstar with cash. We love our Windstar, BTW, and 8 years later it runs like a charm and tows our pop-up camper without a problem. I wish I could say we have been putting aside car payments since buying the Windstar with cash, but it was a lot easier to do that as a single person than as a working Mom with a stay-at-home husband.

mickeyfan2
08-15-2006, 08:13 AM
Figure out approximately how much a monthly payment for the car you think you'd like would be, and put that amount into a savings account every month. If you already have an idea of what type of car you'd like, get a credit card for that manufacutrer to start earning points towards the downpayment.

Keep in mind that if the dealer is offering a 0% interest loan, it can sometimes be beneficial to finance and keep you cash earning interest. I did this when I bought my ION.

Anne
One needs to weight the interest earned vs the increased insurance payments. When you have a loan you must have a $100 deductible (the loan company decides) but when you own your car you can raise that to $1000 and save $100s per year on insurance.

mickeyfan2
08-15-2006, 08:19 AM
Did you have to pay sticker price to get the 0% interest deal? There has to be a catch somewhere -- businesses don't just give things away.
Usually the dealership has to "buy down" the loan for you. They get that back in a higher price for the vehicle.

puffkin
08-15-2006, 09:11 AM
I have read all the posts, and I still don't think paying cash for a car is necessarily the best solution.

You are still putting the money aside every month, so you still have a "car payment". You have to ask yourself if this money will go untouched or will it get tapped into for little "emergencies" or what not. Also, you have to make sure that you can earn a decent amount of interest on the money.

There are so many variables to consider that it really is hard to make a blanket statement that paying cash is the way to go for all people. And I agree with the previous poster about not even bringing in financing or trades until you get a bottom line price for the car. That way you know they aren't tacking on extra costs to the car to cover the 0% financing.

Oh, and while I don't think it is impossible, we had a really hard time finding a newer used car with low mileage and in good condition for a reasonable price. Not to mention you have very little idea of the history of the car. On our most recent car search, we ended up paying about $1000 more for a brand new Corolla than used ones with 20K miles on due to rebates and good old haggling. Plus we got a full warranty.

You have to look at ALL the factors to determine if paying cash and buying new/used is ideal for your situation.

kinntj
08-15-2006, 10:41 AM
My Dh buys his cars new and pays them off and drives them for 5 more years usually. I lease my cars, because I like something dependable and I'm hard on my cars. I don't drive them very much, but the poor things don't get maintained like they should. I'm usually 2,000 miles over before I get my oil changed. I know...slap my hand. Bad car mommy!

JudicialTyranny
08-15-2006, 10:46 AM
One needs to weight the interest earned vs the increased insurance payments. When you have a loan you must have a $100 deductible (the loan company decides) but when you own your car you can raise that to $1000 and save $100s per year on insurance.
What? I have a loan on my car and I've always had a $500 deductible. Why would a bank or loan company or insurance company care what the deductible was?

Make sure your insurance agent isn't conning you.

mickeyfan2
08-15-2006, 10:48 AM
What? I have a loan on my car and I've always had a $500 deductible. Why would a bank or loan company or insurance company care what the deductible was?

Make sure your insurance agent isn't conning you.
Actually the lienholder does dictate the deductible. They really own the car not you.

BTW no need to worry about me, we have paid cash for cars for the last 20 years. No lienholder = I chose my deductible.

DiznEeyore
08-15-2006, 11:13 AM
Actually the lienholder does dictate the deductible. They really own the car not you.

That is 100% correct. ::yes::