Wednesday, August 5, 2009

Paying for a car

I'd rather encourage others to try to save enough to pay cash than to give them excuses to go into debt, no matter what it's for.

That just about sums up all I have to say on the subject. If you have to have a car (and more times than we like to admit, we don't have to have one) and time is short, then by all means, go into debt for one. But don't go into debt for a car that's more than you need.

It's easy enough to get carried away with all that shiny paint and leather and "new car" smell... (dealerships put that perfumey stuff in old cars, too). Don't let it take over your good senses.

The first car I owned, I paid $50 for. I drove it all summer, then sold it for what I paid for it. The next car, I went into debt for... and the next one and the next one. I didn't think I could ever get ahead enough to buy one outright... why, saving several thousand dollars just seemed impossible.

Then, somehow it happened. I had enough in savings to pay cash for a used car, and I've never looked back. Making payments ahead of time beats making them after by a long ways! First, I got to keep the interest instead of paying the bank for the privilege of borrowing money from them. Then, I could watch the balance in my savings account go up, instead of watching the balance on a loan go down, and I'm pretty sure the savings went up faster than a loan would have gone down. The reason is that I was a lot more motivated to pay extra to a savings account than I would have been to a loan account.

When it was time to get rid of that car, I had more than I needed in savings to buy the next one.

It's like starting off on the wrong foot when you borrow that first time. It's a lot harder to get in step than if you'd started on the right foot to begin with.

If you have teenagers or if you are one (or a young adult) looking to buy your first car, take this advice to heart. Pay for it first, upfront. Even if you have to buy a clunker and keep saving for the next one, you'll be 'way ahead next time.

2 comments:

  1. I agree wholeheartedly with the policy of paying cash for cars. I'd like to add to this excellent advice though that it is important not to reveal one's intention in this regard too early in negotiations with a car salesman. They are planning to make a profit on the financing and are likely to hold to a higher price for a car if they know it is going to be paid for in cash.

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