Many people own cars, but not everyone owns them outright. That’s because many people have financed them, whether they’re new or used. If you’re looking to buy, be smart about how you pay for it. A lot of buyers go for a loan, but that’s not always the best move. Paying cash is the best way to go since this is an investment that doesn’t go up in value. As soon as you get your new ride, it will start to lose value. If you get a loan, you’ll be spending money for interest for something that’s worth less than what you paid, increasing the cost of ownership.
Preparing for the Next Purchase
One of the downsides to spending cash is that it ties up money that you could use for other purposes otherwise. For instance, if you have student loans, you might feel that you want to take care of them before making a major purchase. Luckily, you don’t always have to decide between the two. If you have debt from school, look into refinancing it. Many people find they can save money by getting better interest rates. Using a student loan calculator allows you to preview your potential savings from refinancing.
Do You Really Need a New One?
For many people, having enough money to pay cash for a car is that they don’t have enough to do so. No matter what your situation, it’s often hard to save up a large chunk of change to own outright. But that doesn’t mean it’s impossible. First, try to keep your current vehicle as long as you can. Many people don’t do this since they like having something new. If there’s still some life left in your vehicle, consider having it repaired instead of looking for a new one. Weigh the costs of mechanical work with that of a new car.
Setting Aside Funds
If you are able to keep yours well after you have paid off its loan, keep making those payments to yourself each month instead of to your lender. Set these funds aside in a savings account dedicated to this purchase. For example, if you had a monthly payment of around $550, you could keep giving it to yourself even after the loan has ended. Let’s say you kept the vehicle for four years after the loan was paid off. By the time you were ready for a new one, you would have around $26,400 saved up. With this money, you could buy used that wasn’t too old. Or you could spend a few thousand more dollars to get a new one.
Keeping this cycle up will prevent you from having to ever borrow for a car again. It does take some planning, so even if you don’t think you’ll need another vehicle for a while, it’s a good idea to start saving up now. If you can, try to save some extra money along the way. That will help cover repairs on your current without dipping into the funds for the next one.