I’ll tell you right now, this article will not teach you a quick way to get the money you need to buy your dream $30,000 car. This will take time and commitment. If you follow this method, you will be able to afford the car you want. Let’s start off with the basics:
Why is it stupid to take out a loan to buy a car?
1. You’ll be a slave to the lender. Proverbs 22:7 states, “The rich rule over the
poor, and the borrower is slave to the lender.”
Taking out any type of debt automatically makes you a slave to whoever
owns your debt. Once you take out a loan
there is only two ways you can get out of it: you pay off the loan or you go
bankrupt. Either way you are losing.
2. You are spending
way more than the car is worth. If you
purchase a $30,000 vehicle with a 3% interest rate over 60 months, you’re
looking at car payments of $539.06 per month.
If you take out a loan, you will be paying $32,343.60. That’s $2,343.60 lost over a 5 year period,
which equals about $450 a year that you could have used on something else, or
saving for your next vehicle.
3. Your brand new $30,000 car will lose about $3,000 the
minute you drive it off the lot. Once
you drive it, it’s considered “used”.
So, if you read point #2 on why car loans are stupid, you’d actually be
throwing away $5,343.60. A loss of about
$1,000 per year.
Why buy a car with cash?
1. You have leverage.
If you walk into a car dealership with nothing in hand, the dealership will
squeeze out as much money from you as they can.
Show them the cash. If you show
them that you are serious and have $30,000 in cash with you. They will take a
knee and get you into the vehicle you want.
You have the ability to say, “I have $30,000 and not a penny more.” That
$34,000 vehicle that you wouldn’t be able to get with a $30,000 loan just
became available to you for $30,000 on the nose.
2. You won’t be a slave to the lender. You own your car, nobody else does. You won’t have to worry about making monthly
payments on something that is losing value every mile you drive it or every day
it gets older.
The strategy
This strategy takes about four or five years to get you to that
$30,000 car, so plan ahead. If you can,
keep driving the car you have now. If
you can’t continue driving your current car (if it is completely broken with no
chance of a reasonable repair) then take your savings and purchase a car that
you can afford with cash. Now, let’s say you take that $539.06 per month and
you start putting it into savings instead of towards a car payment. In one year, your current car breaks down. You
can afford a $6468.72 car. You keep on
saving that $539.06 per month for another two years, and that car breaks
down. Your used car probably lost about
$1,000 in value since then, but you saved $12,937.44. You can add the extra $5,000, making that $17,937.44
in cash to purchase another used vehicle.
This will get you a very reliable vehicle that should take you to the
end of your $30,000 car journey. Chances
are, in the last 3 years, you earned a pay raise. You bump up your monthly savings to $600 per
month. After two more years, you saved
another $14,440 towards a car. You
current vehicle is now worth $15,500.
After 5 years and two different cars, you have $14,440 in
cash and a $15,500 vehicle. That $30,000
vehicle is now only $100 dollars away, but the good news is, you have CASH! Cash is king when it comes to
purchasing a new vehicle from a dealership.
They will, in most cases take your $29,900 for your new vehicle.
Conclusion:
By saving your money and stepping up vehicles in small
increments, you have saved yourself about $3,000 over five years. Not a bad savings for purchasing a piece of
equipment that is guaranteed to lose value.
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