The Smart Way to Buy Your Next New Car from "My Car, My Life"
Note to readers: At the end of “Commitment Time…or Not (Part 1), there was a food for thought item, a hint as to the content of a future article. Ta-daa! The future is now. Eat up!
Car payments. The only reason we put up with them is because they make it possible for us to drive what we want.
With the price of cars what it is nowadays, making payments are inevitable, unless you want to drive a late, late model beater. And even then, cheap transportation is still $3000 to $6000. Have that much lying around for spending on a car? Not likely. Whether it’s $3000 or $33,000, car payments are a fact of modern life.
Accept that fact – and make it work for you. How? By making interest on your money instead of paying interest for using someone else’s.
When you sign a purchase agreement for a vehicle, you’re going to finance it, which means the interest on that loaned money is going to a bank. That little arrangement suddenly makes your $25,000 car a $30,000+ car.
Now wait just a minute. You’re the one who always makes the smart buy and gets the best deals even on sale items. You go and buy a car and – snap -- that one transaction instantly negates all the money you saved shopping all those sale items.
There is another way. It takes discipline. It takes patience, but here’s how to make a car purchase work for you…
The idea is to work a plan so you can pay cash for your next car. And you can do that by having five years of patience.
Think about it. If you buy instead of lease, you’re making purchase payments for the full vehicle price plus interest to the bank for, most likely, five years.
So let’s turn the tables.
Hold on to that car another five years. This time around, determine the price of vehicle you want to drive/buy in five years. Take that purchase price, divide by 60 and voila! That’s the amount of payment you will want to make to your savings account – that you’ve put under lock and key.
This isn’t a rainy day fund. This isn’t a “but it’s the best sale ever” emergency fund or “I’ll die if I don’t have them” slush fund. There’s no raiding allowed here. You’ve got to approach this account as though it were a payment to a lender. You’ve got to make every payment. Got to make it on time. Got to make it the full amount.
It’s a bit of a mind game, but – hey -- you just made 5 years of payments to a bank. Make 5 more years to you.
And here’s the payoff – you will get a brand new car and pay cash for it! The interest you made on the money can either go into the deal – or pay for a new wardrobe to go with your new wheels!
The biggest thing you have to do to make this work is to accept the fact that you will always be making a car payment. There will be no sense of “car-payment relief.” It will always be a budget line item.
But isn’t this what you’re doing now? All that’s happening here is that you’re turning the tables and acting more independently. You’re making the system work for you, for your benefit, on your terms. And isn’t that what being an independent woman is all about, anyway?
For Those College Grads….
With you just starting out, you’re at the perfect place to make this method of vehicle purchase really work for you. If you’ve been handed down a family vehicle – you’ve been given a great gift that will work for you. Keep that gift. Keep it running. Keep it working for you. Set your sights on the vehicle you really want. Figure out the payments that work best for your budget then start paying yourself. Put the money monthly into that super-sacred, protected, hands-off account. Then, with 3 to 5 years of patience, you can buy your desired ride – IN CASH! Plus, you will have gotten used to following a financial plan that, through the course of your life, will end up saving you 50-, 60-, 70,000 dollars in interest you haven’t had to pay.
OOPS! Some one in the audience just said – “but doing that won’t help strengthen your credit score….” So what! If you’re always buying a car with cash, you don’t need a credit score. Besides, with all the other shopping you put on your credit card, your score will be just fine….