If you are like 75-80% of Americans or the Jones, you live paycheck to paycheck and haven’t saved for a rainy day or invested for retirement. The top two reasons you haven’t is sitting in your driveway, in your stomach (or on your hips) in the form of eating out.
That was certainly our reality a few years ago. We had a brand new pickup sitting in the garage, but could hardly afford to put gas in it. Ben was constantly worried about providing for a family with one average paycheck. My how times have changed in our wheat field. Ben still works his same job, but when it comes to money our behavior is different. We just got done making a whirlwind trip to Oklahoma to pick up a pickup that we paid cash for. (The third vehicle we’ve done this with.) We used the principles we learned in Dave Ramsey’sFinancial Peace University class to track down, dicker for and finally drive away with a new truck. New to us anyway, everyone knows a car’s value drops like a rock. Right? I mean faster than granny can lose her falsies playing poker.
Cash for clunkers was a waste. As with ever other government program, in the end it hurt the tax-payer, hurt small businesses and gave more power to the government. According to CNN 17% of the participants who followed the socialist Pied Piper of Washington to the car lots in August had regrets of trading in perfectly good vehicles and signing up for a payment, higher taxes and insurance. The big surprise was more gas money gets spent driving their nice new car. Tell me. How was that a good idea?
Before you use every excuse we used to use to drive a new car like… “Car payments are just a way of life. I need something reliable. I need something safe to haul kids around in.”..watch this video about how to drive free cars the rest of your life.
Get what your car is worth by selling it privately. Don’t trade it. Period. Dealers are experts at making you think you got a good deal. Remember they are in this to make money and they buy at wholesale and sell at retail. Learn their tricks and use them when you buy privately.
Research your next vehicle while your waiting for your car to sell. We used Consumer Reports, Edmonds, Kelly Blue book, and others to research reliability, market values, and safety ratings.
Buy gently used.Let the first owner take the huge hit on the depreciation for the new car smell. According to Dave Ramsey “it’s like throwing a hundred dollar bill out the window of your new car every week.” Doesn’t that thought make you want to hurl?
Find your car by searching Craigslist, newspapers, Ebay, repo auctions, bank parking lots, word of mouth etc. We have even talked to small dealers about finding what we want at auction and paying them $500-1000 over what they can buy them for. Don’t be afraid to think outside the box, that’s usually where you save money.
Have a mechanic look at it and drive it. Even if it costs you $30-50 dollars, it would be better than buying a lemon. While they’re looking ask questions and pick their brain. Do you work on these much? Is that engine a good one? Do these transmissions last? What vehicles do you work on the least?
Never pay asking price, dicker. I love doing this. I wrote about how to do it and not do it here. Ben usually lets me dicker because it’s not his forte. While we are doing the good-cop/bad-cop thing he has been know to say, “I know, Man, you ought to try to live with her.” It’s all in fun and part of our evil plan, but it works. So let the dicker er er in the family do it.
Getting a different car is time consuming and frustrating. It takes focus and perseverance, but in the end can save you big time. We figure we saved $3000 in the month it took us to sell one and buy another. Since I don’t work much outside the home, I figure that is my paycheck. For the time I put into it, I madesaved hundreds of dollars an hour. Certainly nothing to sneeze at. With savings like that, we can afford to do recommended maintenance and fix problems once in a while.
Simply,
Sis
Tags: baby steps, buying a used car, cash for clunkers, dave ramsey, driving free cars, financial peace university, how to buy a car, new vs used car, paying cash for cars, researching cars, saving money buying cars, using edmonds to buy used
Wow! Cool video and thoughts. So we have our cars paid off and are trying to get every last inch out of it. Our problem is the credit cards. Sigh. Advice?
I hear you on the eating out. It’s very clearly what got us in this mess in the first place with our busy, way over-scheduled lives. Well that and my husband’s mba tuition and the want to have it now mentality. Luckily, he has only one quarter left. Whoop!!
Now did I mention we pay more than a carp payment in swim team practice and meets? Gah! $500-600 a month and sometimes as high as $800. These kids better get swimming scholarships, I tell you.
~Scout
Yay for you…your cars paid off!
About your credit cards…it was life changing for us to cut them up and cancel them and go to all cash. In fact the first month I felt a little queezy about doing all cash. Isn’t that weird? Other than that, it sound like you understand all the issues, it’s the behavior mod. that is tripping you up. And derned if that aint the hardest part to change.
Holy cow about the swim meets! Scholarships, oplympic gold medals, wheaties contract, speedo contract…yeah, and a don’t forget Mom and Dad when you go large, kids!
Always great to see you, my friend.
Sis
How did the value of the car you own suddenly go from $1,500 to $6,000 ? WHERE do you get a “gently used” car for $6,000? Are you talking about one that is 10 – 15 years old? Please GIVE 3 examples of a “gently used” car that does not need repairs, has reasonable mileage, and is $6,000 or less?
I bought a new truck this year for the first time, and my payments are less than your example with 0% interest, and it has a LIFETIME warranty. Yes, the value of the truck has gone down, but I never have to worry about repairs.
Please explain how your method is better? Either way you are forking out $400+ a month. What is the difference? I’m paying no interest, I can pay extra if I want to, and I have a LIFETIME warranty. You have an older car that will need repairs sooner (which will be additional amount on top of the $474).
Finally, please give a real world example of a “good mutual fund that averages 12%”?! Get serious!
tc909 ~ when I watch the video I understand it to mean two different cars one valued at $1500 and one at $6000 (everyone knows a car’s value doesn’t jump) Gently used cars are easy to find every car lot has them, however, on a car lot, the price usually isn’t nice. Like I said in the post, shop private sales, auctions or small dealers without all the overhead. Remember asking price rarely has anything to do with what you can buy it for with cash. I have to two vehicles sitting in my driveway that we haven’t put a dime in and were gently used. (Of course YOUR idea of ‘gently used–and resonable mileage’ is reletive isn’t it?)
Dave Ramsey thinks auto warranties are stupid. Again, if put that money to work for you and you’ll come out ahead since your new car will loose $100 a week in value. I don’t let fear drive my decisions. Like the fear of my car breaking down. In the last 15 years we have spent around $2500 in repairs an average of $167/year ($1500 of that was on a transmission rebuild on our old fishing truck.)
The biggest reason I think Dave’s way is a great one is…The $400+ you fork out every month is invested at our house (or partly used to pay off the house early saving lots in interest) instead of driven.
According to DR the stock market has nearly averaged 12% since its start. About good mutual funds…we just made 20-22% on ours in the last quarter. Yes, we lost money like everyone else when the market was down, but we are almost back where we started now. Go to morningstar and use their fund finder to research funds for yourself.
Thanks for reading.
Sis
We have had a honda cr-v for ten years and have had to replace the radiator, but that’s all in ten years! We paid cash. No payments. Reliable. No payments. The best thing about paying cash is the deal is done. There’s no payment due anymore. hmm. So, if something happens and you cannot come up with $400 for your car payment, and the chances that something will happen in the next 5 yrs or so are pretty good. If that happens, your stress level goes sky-rocketting. But, on the other hand if your vehicle is yours meaning you own noone… then the stress is minimal. It’s very controversial, the common sense stuff, isn’t it? But, people around you will begin to notice and like what they see… a friend of my husband called and said he wanted to do what we did… save and pay cash. It was so great to see someone want to do that instead of say we were nuts.