I am beginning to save money to buy a car. My wife and I became debt-free except for the mortgage back around February of this year. Since then we have been pouring money into our emergency fund. We are now satisfied that we have the equivalent of three to six months of living expenses socked away. We used some of our bonus money, tax refund, and economic stimulus check for a big chunk of this. We are already contributing to my 401k at work so, one of our next priorities is starting to save for a newer vehicle.
The kind of car that I’ll be looking to buy.
I say newer instead of new because I intend to buy something used. I’ll let someone else take the big depreciation hit that occurs in the first few years after a car rolls off a dealers lot. I’ll probably be looking for something like a Nissan Altima that is 2 to 3 years old with low miles and some nice features. The Altima seems to get good ratings in quality and customer satisfaction plus there are tons of them around. This means that it won’t be hard to find a good used one when I’m ready and I’ll probably be able to negotiate an attractive price.
Right now, I drive a 1997 Ford F-150 pick-up. I’ll probably be switching from a truck to a car when I make this purchase. With gas prices up above $4.00 per gallon with no relief in sight, it only makes sense to go with something that gets better gas mileage. Nissan is now offering a hybrid version of the Altima so, by the time I’m ready to buy, I might be able to go green. The Altima Hybrid gets around 35 miles to the gallon. This would be a significant improvement over my F-150.
I’ll definitely pay cash for my car.
I’ve paid enough interest in my life. I’ll be paying cash for this vehicle. Based on the budget right now, I think we’ll be able to save the $12k-$15k necessary in 18 to 24 months. I am creating a subaccount at ING Direct to segregate my emergency fund from my car fund. This should help me easily keep track of our exact progress toward our savings goal. If you haven’t tried ING Direct, you should consider giving them a try. We just set up our account a few months ago and so far I’ve been very impressed. I’m also earning more interest than I would in my normal savings account.
I’ve heard that dealerships aren’t that excited about customers paying cash. I guess they make most of their money from financing and selling extended warranties. Overall, car sales are down this year. According to an article at Bloomberg, based on June figures car sales are down 20% from this time last year. With this news, word on the street is that automakers are getting ready to offer all kinds of incentives. You’ll probably see gimmicks like 0% financing and rebates out the wazoo. My favorite right now is the so-called “Fuel Price Protection” offered by Dodge. I will not be falling for Dodge’s crafty $2.99 gas guarantee or any other marketing ploy. I’m going to stick to paying cash for a slightly used vehicle.
I’ll probably look at buying a car from an individual.
As an individual that sells things occasionally, I love it when people pay cash. However, like I said above, I understand that dealers aren’t as excited. I’m concerned that if a dealer sniffs out that I’m going to pay cash before the negotiations are done, then they might jack up the selling price to create some profit. Therefore, I’ll probably look at buying my vehicle from an individual. Of course, this isn’t without risk.
We got stung once when we bought a car from an individual. Apparently, the vehicle had been in a wreck prior to our purchase. This was definitely not disclosed to us and the repairs that had been done were subpar to put it nicely. The shop told us that the wheel was about to fall off due to the damage that had been done to the front-end. After several hundreds of dollars in repairs, we ended up trading it in to avoid future issues. I’ll think long and hard about getting the car I plan to buy checked over by an independent mechanic prior to closing the deal to avoid a similar fiasco.
Buying a car is a big deal.
For me, buying a car is a big purchase. I want to do it right. Fortunately, I have plenty of time to research my options and prepare while I’m saving my money. If you are thinking of buying a car in the near future, here are a few articles you might want to take a look at first:
My experience buying a used car with cash @beingfrugal.net
Buying a New Car? Skip the Negotiations @My Dollar Plan
Money Mistake Monday – The I Fell For Another Car Lease Syndrome @My Two Dollars
Shaking the New Car Itch- A Tale of Priorities @Get Rich Slowly
Do you have any tips on car buying that might help? If so, please be sure to leave a comment below and let me know. Thanks!
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Photos by johnny_nissan and Baltimike
Jeff-make sure you take the time to compare the cost of ownership if you are thinking hybrid. The data I have seen to date shows a higher cost than a conventional car. Much of this is due to the replacement cost of the batteries. Also, I have not seen anything since gas went through the roof. It was all based on gas prices around $120 a gallon.
I’ve personally had good luck with Carmax. The price is slightly higher than you’ll find at an individual, but comes with no hassle and a wide selection.
Also, don’t tell them until the end that you are paying cash. This goes for any dealership.
Jeff, better yet. Have the cash ready and use your rewards credit card to buy the car. Then pay it off immediately. Check it: http://www.marcandangel.com/2007/06/25/when-buying-a-car-with-a-credit-card-makes-cents/
@B – Good advice on checking the cost of ownership on a hybrid. I’m going to have to research that a little more.
I’ve wondered about Carmax. We have one not far from my home. Have you bought a car from them? Anyone have personal experience with Carmax?
@Marc – I’m a little squeamish about using a credit card in this way. I’m not sure it is worth the risk. If something went wrong, then I might end up owing several hundred dollars worth of interest and fees.
Plus, I don’t even have a rewards card. I have one credit card still left over from my “old days” that I don’t use. I’m living debt-free baby and I tend to believe like Dave Ramsey says, “If you play with snakes, you’ll get bitten!”
Anyone else have an opinion about buying a car on a rewards card?
Thanks for the comments and keep’em coming!
Congrats!
I liked the part about getting the car checked out by an independent mechanic first. Wish we had.
I also read somewhere that hybrids are not worth the upfront cost, and the article convinced me not to buy one now. Sorry, I do not remember where I read that.
For a small fee, I believe you can research the VIN number of the car you are going to buy, to see if it has been in an accident. We did not hear about this until after our lemon, so I am not sure how. Hopefully, you can research that, or someone else will post about it.
My partner and I bought a car, and did not realize until a little later that it had been in an accident. $3,000.00 in repairs later, we took it back to the dealer and told them we could not afford it. Also, that we believed it had been in an accident. I begged them not to put it back out for sale. They did.
The 2004 Volvo S60 we have now is great.
Best Wishes,
Francine
Me again. It is your lucky day!
Just read the Simple Dollar newsletter and hit the link to: edmunds.com
You have GOT to go to that website:
*10 Steps to Buying a Used Car (includes researching VIN number)
*Car Reviews and Ratings from readers: Year, Make, and Model.
*Confessions of a Car Salesman (a must read for everyone – how do car salesmen sleep at night? – sorry if anyone reading this is a car salesman)
Warm Regards,
Francine
Definitely check out Consumer Reports. Some car models can be generally good but still have one off year. You want to make sure you’re getting the right year for a car.
@Francine – Thanks for pointing out the resources available on the edmunds.com site. I’ll check those out. It sounds like you had an experience with a lemon similar to mine. I’ll certainly think seriously about getting the next car I buy checked out before I close the deal.
@FFB – It is interesting how car manufacturers have off years on certain models. Good advice!
Thanks for taking the time to comment!
Jeff – I like everything you said in this post. As a car expert – I worked in the auto business for 10 years – your advice about paying cash and buying a car 2-3 years old is spot on. However, I would strongly advise that you try to buy from a franchise dealer. In a nutshell, the vast majority of car-related fraud that’s committed in the USA is perpetrated by individuals. When paying cash for a used car being sold by a private person, you’re actually taking on more risk than you would buying from your local franchise dealer. I’m not saying that all private sellers are bad – far from it. However, most of the crimes (like selling flood damaged vehicles, salvage titles, etc.) are committed by people pretending to be a private owner.
If you do decide to buy from a private party, here are some tips you should study:
http://accurateautoadvice.com/buying/7-tips-for-buying-from-a-private-individual/
@Jason: I appreciate your expert backing on my suggestions. You may be right about about the risk involved in buying from a private seller. I’d be willing to pay a little more for some assurance that I could avoid the problems people encounter with private sellers. I just don’t want to pay a lot more. I guess the key is to educate myself properly before going to a dealership so I can negotiate intelligently.
Thanks for sharing the information!
Jeff – You’re absolutely right. If you take the time to educate yourself you’ll never pay more than you should.
at home we have a use car that is a Nissan Murano. i love it :
i am into car sales business and it is a good way of earning money ,,;
Flo-wow, what a day-so sorry it wasnt what you expected it to be. Please always carry your own fluids-its a lesson I learned early on. Im the nerd always wearing my fuel belt, but ya know, I have what I need when I need it and if it adds a few seconds to my time, so be it-Im not passed out like others Ive seen on the courses Ive run. Take some time to rest and know that weve all had bad runs! Steamtown awaits and you will be superb! Lisa
I just bought a Nissan with high miles and LOVE it. I live in Wisconsin and it still runs like a champ. Will buy a newer one in the next three years.
Whenever I get a job, I plan on buying a car (with cash), and most likely from a private seller too.
I was thinking 7k. I think that’s a pretty decent price for a car, especially for someone with an OK income. I just wonder how long it would take to save up $7,000.