You won’t make the cardealer happy, but you’ll be happier and wealthier if you forgo the auto loan and the extended warranty dealers are always pushing. Maybe you won’t be able to afford the shiny new car of your dreams. But if you buy a used vehicle with the money you’ve saved, you’ll be able to afford much more down the road. You won’t have a payment coupon book to worry about, or the debt that goes along with it.
Tips on Buying a Car with Cash
Car dealers will try and entice you to finance
“See how much more car you can buy! The payments are so low!” Sure the payments are low. Just figure how many years you’ll be paying interest plus principal on that vehicle.
Comparison shop before you enter the dealership
First, determine the make, model and year of the car you’re interested in. Then go to Edmunds and find out the price you should pay to get a good deal. If you arm yourself with information, you’re less likely to get suckered in by a smooth-talking salesman.
Start saving for a car before yours breaks down
The worst time to shop for a car is when yours is on its last legs. If you have a lot of miles on your car and you feel like its life is limited, start putting aside money every month. Open a money market or certificate of deposit and shop for the best interest rate you can find.
Drive your car as long as you possibly can
It doesn’t matter if it’s five or ten years old. If that car runs safely, keep it. And invest the money you would have spent on car payments. Soon you might have the down payment on a home, or a great start on saving for retirement.
Don’t buy a gas guzzler, no matter how good the deal seems
Dealers are trying to unload big cars. The price tag might seem low, but you’ll quickly eat up those savings at the pump.
Buy a used car that still has the factory warranty
That way, if anything goes wrong, you’ll be covered.
If you have a car loan now, pay it off quickly
Even if it means selling the car and buying a less expensive model. The sooner you pay it off, the sooner you’ll get rid of those high interest payments. In the meantime, try to refinance and get the payments lowered.
You may not be the envy of the neighborhood in your economical, pre-owned car. But when your neighbors are still making car payments and you’re building wealth, you’ll find out who’s the envious one.
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