How to Buy Cars With Cash

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For some folks, the idea of trying to buy cars with cash is a fairy tale.  They think it is a dream that others can enjoy, but they will never enjoy.  However, here are some practical steps you can take to get yourself behind the wheel of a car – not in front of a loans desk at the bank.

In a previous post, I showed how much money people can save by paying cash for a car instead of car payments.  That is going to be your first bit of homework.  Read that article and find out how much you can save, and that will give you the necessary motivation to pursue some or all of these approaches.

Buy Cars with Cash by Making Monthly Payments to Yourself

There is no way around the fact that you’ll need to put money aside if you want to buy cars for cash.  Your alternatives are pretty clear:

  1. You can pay monthly payments to a financing company and lose 8%+ of your income to interest.
  2. You can pay monthly payments to yourself so you will be in a position to pay cash for a car.

I’d suggest getting a separate savings account or a sub-account with ING Direct, or you can start a savings goal with SmartyPig and transfer money to that account every month.

Over the last four years, we’ve had a line item in our budget called “Future Car”.  Every month we transfer that money into a designated account.

Spend Money Before You Earn It

When you budget for unexpected income, you need to allocate that money before it arrives.  If you are serious about buying a car with cash, you need to designate all extra money that comes into your bank account towards saving cash for the car.  This includes bonuses, gifts, and unexpected refund checks.

Consider Living as a One Car Family

Impulses can get to be terribly expensive.  Most of us can’t afford to be impatient, but we are impatient nonetheless.

Still, one of the best ways to help you buy cars with cash is by going through (at least for a period) a time when you only live as a one vehicle family.  While this is impossible in some situations, many families could function with one car if they were willing to (1) be inconvenienced, (2) cut costs by being resourceful and creative, and (3) organize your finances and your schedules.

By dropping down to one car, you save on maintenance, payments, and insurance.  Take what you would have been using to pay for your car and apply that now to a future car savings account.

Use your time as a one car family to help you get ahead of the ball and make payments to yourself.

My brother and his wife have had only one car for almost a decade.  They both work outside the home at different locations and have two kids in school or daycare.  I always think – if they can do it, most people could.

Alternatives to owning your own car:

  • Car sharing
  • Public transport
  • Schedule adjustment
  • Get help from family
  • Alternative transportation (walking or biking)

There may even be some cases where you could accept a job that makes less money, but is closer to home so that you could drop down to one car.

Slowly Search for Private Sales

The best place to buy cars with cash is through private sales.  Since you’ve mastered the art of being patient and even inconveniencing yourself, (while you save money for the car) you are now in a prime position to get a great deal on a car.

Several years ago my wife and I were casually looking for a second car.  Since I worked within walking distance of my work, the second car was definitely a luxury, but there were times when it got quite annoying not having a second car.  And we had the cash to buy a second car.

After scanning through the newspaper for a few weeks, I came across an older, low mileage, Honda Accord.  The owner had the car since it was new and rarely drove it.  We got a great deal on the car (and it performed amazingly for the four years we owned it).

Financing makes car shopping easier.  You just try and get as much car for your allocated payment.  However, when buying cars with cash, you need to patiently search for the right car that will reward your diligent savings habit.

I would also add that shopping for a newer car before you need it is important.  Time is your friend.

Car Shop as a Family

Seriously, take the family.

When we bought one of our cars, there was actually someone who made a higher offer for the car, but the previous owners said they “had a good feeling about us.”

When you are buying a car from strangers, trust is always a very important factor.  If people see you as an honest family, they are more likely to sell the car to you and give you a better deal.

What tips do you have for people who are trying to buy cars with cash?


  1. says

    We do something similar although I would add two thoughts:

    1) We combine our car maintenance and “future car” funds into one (virtual) envelope. This is because as your car gets older and requires more maintenance, the trade off really becomes taking money away from your future car fund.

    2) We have bought our last two cars from dealerships and have gotten car loans. In one case, we were able to negotiate a lower price ($500) on the car by agreeing to a car loan. In the other case, we had driven over an hour for our car and paying cash would have required us to come back a week later. Both times we put a large sum of money as a down payment and paid off the car in the first month, costing us a minimal amount of interest for convenience.

  2. says

    We bought our last two cars by paying cash, one a $15,000 car, the other about $10,000. Paying cash for a car is really no different from getting a loan. In one instance you’re just paying yourself, paying no interest, and driving a paid for car when you’re driving around. It really is a nice feeling not having that debt hanging over your head.

    To facilitate this, as mentioned, we just set up a sub account in our ING savings, and pay ourselves payments every month. We’re currently saving for our next car!

    • says

      Awsome – thanks for encouraging us with your story. I do think driving paid for cars is much better than payments. Yes, payments to yourself are essential.
      @Freely Giving
      If we ever did need to get extra money to pay for our cars it would also come from our future vehicle account. I’m still a cash all the way person. He with the most patience usually gets the best deal.

  3. Peter Palek says

    Graig, I am having some difficulty in saving money in the past, but after reading your advice, it has encourage me and brings in mind new ideas of saving money. I am now begining to make changes and the results are very encouraging.

  4. LaShaunna says

    Thanks for putting this advice out there for those of us seeking. We (my family) want a new car. We need a bigger car. I’ve been wanting an Escalade every since I can remember! I’ve been praying for one… hoping it would just pop up in my carport. I now believe that I am serious with God and my financial situuation. I’ll get my Escalade. I have debt that must be paid 1st, and a savings account that need to be started. I will now walk in truth and honestly focus on the both of them. Thanks.

  5. Jeremy says

    Graig, I have somewhat of a technical question on the actual transaction of paying with cash. I’m looking to spend around $13,000 for a car, should I bring the actual cash? What’s your opinion on the best method of payment.


  6. John Lechner says

    Is the best way to buy a car..(.when you have the cash)
    Take the best deal…finance included…then pay off the loan?

    • says

      I guess if a car dealership is willing to give you a lower price if you plan to finance the car and there is no early pre-payment penalty that might be a cheaper option.

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