I never want to have a car payment again! That is what I told myself after purchasing a used Toyota Tundra Truck in 2008. I paid that truck off in 2011 and haven't had a car payment since!! One of the best financial moves I've ever made. That line of thinking may not be for everyone, but it certainly has worked just fine for me.
After all, who really wants a car payment?
The problem is that too many people actually get to the point, in their mind, where they think they can't actually purchase car for cash.
Most of us reading this can purchase a car cash. It's just a mental hurdle that we have to get over in order to get there in our minds. Like Dr. Dennis Kimbro, professor and author, says "everything starts in the mind first". Once we have it in our minds, then we can do it. If it never enters your mind that it's possible, you will never be able to achieve it. Sounds simple, but mastering that one concept can change your life forever.
So It's not quite as simple as simply saving your money for a car. You have to first believe that you can do it. After you believe it, then from there It's discipline!
Hear is a quick illustration of what you can do if you simply plan, save some cash, and execute on the belief that you never want to have a car payment.
1. In the next 12 months commit to save $4,000 cash. Why $4,000? Because I've found that you can buy a pretty good quality car with $4,000. You can save what you want, but for most of us $4,000 is a good goal to strive for, and the quality of cars you can look at for $4,000 are a lot different than $2,000. But start where you can. Consider budgeting monthly, stopping vacations, spending less, or nothing at all, on the beautician and the nail shop, no massages, and cooking at home more so you can eat out less. A $4,000 a year is a commitment of about $333 a month. For some of you that is a lot, but for many of you, that can be done with a little bit of sacrifice, focus, and concentrated effort.
At the end of 12 months, purchase Car 1.
2. After you purchase your car cash, continue to save $300 per month. Ok, so by now living on a budget is cool, you've disciplined yourself, and you start to realize that budgeting and disciplining yourself around money, will actually free up MORE money.
When you manage your money, you end up having more of it. So after one year on a strict savings plan of $333 per month, scaling that back to $333 per month will be a breeze. If you have a $4,000 paid for car that you take good care of, and save $300 a month for 1 more year, then you will have $3,600 cash and a paid for car.
At the end of the next 12 months, sell your $4,000 car for $3,500 and add that $3,500 to the $3,600 you have.
Now go out and buy yourself a $7,000 car.
3. After you purchase Car 2, continue to save $250 per month. Now, after 2 years, reward yourself, and scale back your savings, because by now, if you've followed this plan, you've probably gained control of your finances and other ares of your life. Save $250 per month for 12 months. At the end of a year, you have another $3,000. Now you are driving a $7,000 paid for car, and you have $3,000.
Now, 12 months later, sell your $7,000 car for $6,500 and add that $3,000 to the $6,500 you have. Now go out and buy yourself a $10,000 car for $9,500. In other words, when you have $9,500 cash, you can get any $10,000 car you want. Money talks.
Now at the end of 24 months, you have a $10,000 paid for car.
You owe the bank nothing! Keep your car! Take good care of it for 5 years. During that time, pay yourself $250 per month, instead of paying a finance company for a car payment. At a modest 8% interest in a mutual fund, or index fund, you'd have about $30,000 in that 5 years. No joke!
Or feel free to continue this until you get up to a $15,000 car or more.
Your money, your choice.
I gave an example of a plan, but you can follow and develop your own plan if you like. The point is to commit to not having car payments and devise a strategy that works for you!
Happy purchasing your cars for cash!!