Tuesday, July 8, 2014

Buying Cars with Cash

It's been a long time since I've written. I have a hundred excellent excuses. You won't get any excuses today, but you will get a lesson the Johnstons have learned the hard way. We recently lost both our cars on the same day.

Seriously.

We were in the midst of a very busy season on top of that, but that's a story for another day. One car broke down on the side of the highway. Radiator went bad and caused the engine to seize. The other car didn't die a complete death but did need a new water pump and took overnight to be fixed. We were without any vehicle for about 48 hours and needed to rent a car temporarily just to get by. I don't know that there has ever been a day that I have been more thankful for our emergency fund. We have a car repair budget, but occasionally the repairs exceed the money in that envelope. With that fund and our emergency fund, a car (or two!) breaking down is just a serious inconvenience.

I've written before about living with one car and our numerous car accidents (one, two, and three!) before. I even touched on our terrible car purchase after car accident number 2. We got great deals on excellent little Honda Accords after accidents one and three, but #2 we felt rushed and purchased a Mazda Protege. We didn't do our research and within a week were replacing belts and other not-so-awesome things. We've put a lot of money into that car over the past 18 months and yesterday we sold it to our repair man. For $450. Minus repairs we net $310. Seriously...

At first I was so angry. We lost several thousand dollars in 18 months because of a car Jarrod and I both hate. I quickly got over my anger because of the incredible lesson we learned through that stupid car. As we are preparing to purchase a new car, I want to share some of the things we learned...

1. Don't rush. It's less expensive to rent a car and purchase the right car than to rush into the wrong purchase because you feel frantic. Look at a lot of cars if you don't know what you want. Test drive cars and check out private sale vehicles to get what you want.

2. Do your research. If you have your eye on a specific type, make, model, or flavor of car, know exactly what it should cost. You can find this information at Kelley Blue Book. When we bought cars after our first and third accident we did research, haggled, and were prepared to walk away if we didn't get the price the car was worth to us.

3. Haggle. When we bought our Honda Accord after our first accident we were in a position to wait. We didn't want to bother with private sales, so we went to a local dealership and asked to see what they had in our price point. The first car they showed us was a late '90s Dodge Neon. Nothing wrong with that, but not what I had in mind. I asked to see a 2003 Honda Accord that was about $2,000 above our budget. I drove it and loved it. We got the price down where we wanted and then walked away. When we came back they honored the price (below Kelley Blue Book!!) and we paid for it with cash. I know the dealership lost money on that deal (and I feel a tiny bit bad about that...) because we stuck to our budget, bargained with them, and walked away when we needed to.

4. Buy used. This goes without saying. Unless you have a high net worth and can afford to take the financial hit on buying new, there's no other way to get a car. I definitely don't want to be the one to take the hit when a new car loses all of it's value! A new car loses the vast majority of it's value in the first 5 years. While someday we may have a car newer than 5 years, we do not have the money to waste right now. Having a new(er) car is paying for luxury, not need. I don't need the newest, fanciest model if the 5 year old model is still fantastic.

5. Pay cash. Hopefully this goes without saying, but paying cash is a must for our family. If I'm angry about losing a few thousand dollars on a car, I'd be SUPER angry about losing several thousand dollars in interest! Paying cash allows us to get a great deal, avoid monthly payments, and stay in control of our money. Cars lose value and I do not want a payment on something that is losing value! Want more information about why we don't have car payments, check out the truth about car payments by Dave Ramsey.

All that said, we have been doing our research, examining our budget, and plan to buy a new-to-us car within the next few weeks. We are disappointed that our car died because we hoped to use the next 6-10 months to save for a newer, bigger car, but that's not in the cards right now. We will not be depleting our emergency fund to get something bigger and better, but will be spending a small amount of money on a reliable vehicle that will get us through until we can save for something better - hopefully by the first part of next year!

How do you save on cars? Do you have any tips on changing our luck with vehicles? :-) 
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1 comment:

  1. Good thing you avoided that Neon...my '98 was a money pit the 4 years I drove it...it was evil...

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