Paying Cash for a New Car

Posted by Mrs Money on June 7th, 2010

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I never want to have a car loan again.  Once my car is paid off, I hope that we can save up enough cash to replace either vehicle we currently own.  We bought my vehicle (a 2005 Ford Freestyle) about two years ago, so I’m hoping that it will last at least 10 more years.  That would be great.  We also own a 2002 Ford Mustang and I’m afraid that we will have to replace that sooner than 10 years from now.

Electric Ford Focus
Creative Commons License photo credit: futureatlas.com

The thing is- I really don’t know when we should start saving for a replacement vehicle.  I’m content with having one really good reliable car that we can take on road trips (very important as our families both live out of state!) and then the other car can be one that we use to commute back and forth to work.  It doesn’t have to be anything expensive.  I’m thinking that we’ll keep driving both cars we have until we can’t drive them any more and then go from there.

I should budget for car maintenance so that we’re able to pay cash for any repairs that may pop up.  I’m thinking that once our current car is paid off that I’ll start putting money aside for a replacement car.  Hopefully we won’t need the money for quite awhile!

Do you think I should think about saving money for a new car once ours is paid off?

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23 Responses to “Paying Cash for a New Car”


  1. Sue says:

    Mrs. M –

    do you mean “a NEW car” or a “new to YOU car”? If you’re saving for the former, start now and be prepared to take a $.30 on the dollar depreciation as soon as it leaves the dealer’s lot. If you’re saving for the latter, you’ve got some leeway – or you can start saving a smaller amount now and let it grow over a longer period of time.

    We have one car (by choice and necessity) and will begin a savings plan shortly – after we relocate and get a grip on our finances in a new state/city. :) Eventually, we’ll buy another car, but seeing as “Elsa” (yes, our car has a name) is a solidly-built Swedish vehicle, we’re hoping to get a good 300K+ miles out of her. :)

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    Mrs Money Reply:

    Sue- Oh gosh! I think I could only buy a used car. The depreciation makes me sick! :) I hope your car lasts for a long time!

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  2. Kevin says:

    Yea start saving right away. When your done paying on your car just keep making that payment but to your savings instead. You’re already used to not having that money so it won’t hurt you. Plus anything else that you can put in savings will help.

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    Mrs Money Reply:

    Kevin- I think I’ll do that! That way, if our cars last a lot longer than we thought, at least we’ll have the cash on hand in case we need it. ;)

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  3. Jin6655321 says:

    Oh definitely! Keep in mind that if you’re going to drive your current cars into the ground, you won’t have anything to trade in. I’m also hoping to get through life with as few car purchases as possible. My goal is to arrive in retirement with a good, reliable car that’s already paid for.

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    Mrs Money Reply:

    Jin- We try to do that. I’m hoping that our current cars last quite a while longer!

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  4. Becky R says:

    I think as soon as you finish making the car payment just keep making it every single month. That way you have money to replace your car.
    If you are paying $200 a month, that would be $2400 a year, after 5 years (how long your 2005 will last approxiametly) you will have $12,000. That should buy a good used car.
    Also don’t forget to budget for car registration, barkes, tires, regular maintance, etc. Figure out your cost for the year and divide by 12 and put this much money away monthly in addition to your car payment.
    This will ensure you always have cash for car repairs and maintance.
    I applaud you wanted to live car payment free, as debt puts us in bondage.

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    Mrs Money Reply:

    Becky R- Thanks! I am hoping that our car will last about 10 years longer, but who knows. It’s only got like 35,000 miles on it now. :) I figure it can’t hurt to have the cash saved up.

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  5. Becky R says:

    that’s brakes

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  6. I think you should start saving now. Funny About Money had a post on exactly how to do this a couple of weeks ago: http://funny-about-money.com/2010/05/28/how-to-buy-your-next-car-in-cash/

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    Mrs Money Reply:

    Mrs. A- Thanks! I am not looking forward to car shopping in the next 5 years, but at least we’ll have some cash saved up if we need it, right?!

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  7. Ginger says:

    My fiance and I have one car (a 2003) and plan to get a new to us car in 5 1/2 years (at the earliest), when we need a new car for children. Our car only seat 4 and we plan to have 3 children. We have no car payment and are not about to start having one. We put aside $750 for car related expenses a year and roll over the extra money for the next year. As we get better jobs we will increase this but for now, we save what we can. In 5 years we will have about $2750 so I really do hope we can get better jobs soon. If we have not we will turn sell the 2003 to get the next car.

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    Mrs Money Reply:

    Ginger- I love your plan! I think that’s great. I hope your car lasts longer than you think it will. :)

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  8. I’d start paying yourself the monthly car payment once you have it paid off. That’s how we save for our car maintenance and future purchases. Good luck!

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    Mrs Money Reply:

    BITFS- Thanks! :) I’m hoping it’s a while before we need a new car.

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  9. Pamela says:

    what’s wrong with starting to save now? Even if only a small amount each month? I drove my last car into the ground. I inherited it from my grandfather so I never had a payment. When the little things started going wrong I started saving big time. A few years later I didn’t feel safe driving it any more (it was approx 17 years old). I had enough saved to walk into a dealership and buy a 3 year old one prior owner car that I love!

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    Mrs Money Reply:

    Pamela- I was worried that I should be saving for something else.

    It’s funny- I drove a 15 year old car from my aunt before this one I have now. I loved it and wish it wouldn’t have died. :(

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  10. I agree with the others that you need to start saving for a new car once you’re debt-free.

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    Mrs Money Reply:

    Bucksome- I was worried that I should be saving for something else instead (like retirement) but I guess it can’t hurt to save for a new car. I’ll just keep my fingers crossed ours last longer! ;)

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  11. LivingOurWay says:

    We were able to purchase a late model new to us in cash last fall. It felt much better to pay in cash to begin with than it had felt to pay off the old car it was replacing. If possible, we will never have a car loan again. There is so much freedom that goes with having a paid off car!

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    Mrs Money Reply:

    Living Our Way- I can’t wait to get ours paid off. I know what you mean about paying cash for things- there’s a little high you get when you pay cash! :)

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  12. Sara G says:

    I am with you and hope to avoid car payments in the future! One car is paid off and the other is on a 36 month loan that will be paid off in November of this year. (My husband also has a truck that we bought in cash from a friend. It comes in handy at times and my husband can tinker with it.) I do want to start saving for my next car once we have no car payments. I expect to want a new (to me) car in another 5 years or so. I want to get a head start in saving for it.

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