Wednesday, October 25, 2017

Purchasing a Vehicle with Cash

 My husband's new all electric  Leaf. 

My husband just replaced our van with a Leaf all electric car.   The vast majority of our driving is within a ten mile radius of our home, making the Leaf perfect for my husband's daily commute to work.  The fact that this car is electric makes it a little unusual, but what is also less than average is the fact that we bought it with cash. We like to plan ahead and hand over hard-earned dollars for all of our purchases - including transportation.  


Your budget is on target.  You are cruising along at warp speed.  You are meeting goals, paying cash for every transaction, debt is in your rearview mirror, and you can see the financial freedom finish line up ahead.  Suddenly, the unexpected happens.  Your vehicle begins making a sound akin to a set of Ginzu knives slicing through a row of metal trashcans.   You are pretty sure that your formerly reliable transportation is about to give up the ghost. Less than 24 hours later you get the prognosis from your mechanic.  Humpty Dumpty cannot be put back together again.   

                                        PLAN AHEAD TO REPLACE THAT VEHICLE!

In the Ware household, as soon as we purchase a car, we begin saving to replace it.  We never purchase brand new cars.  It just doesn't make sense.  Transportation is not an investment.  It is depreciating from the moment you drive it off the showroom floor.  When we first married, our goal was what we called the 4/40 vehicle:  4 years old and 40,000 miles on the odometer.  However, in nearly 30 years the price of cars has escalated to the extent that our new norm is generally 6-7 years old and 70,000 miles.  We purchase with cash and keep vehicles for an average of 10 years.  When the cost of mechanical repairs begins to outstrip the value of the car, we replace it.  We try to estimate the life of our current model and then save accordingly.  For instance, if we expect our current automobile to last for 10 years, we decide how much we are willing to spend to replace it, and then divide that amount by the number of months until our expected purchase date.  If we are willing to spend $15,000 on a car and we have 10 years to save that amount, then we must set aside $125 for the next 120 months in a "car replacement fund." 

 So, let's see how that concept fits in with today's story, the one in which your ailing transmission just moved your vehicle replacement plan to the forefront of your budget. 

                                  WHAT TO DO IF YOU NEED TO AMEND A GOAL:   

- First, do not panic!  Share a car with your spouse, take the city bus, or get lifts from friends, neighbors, or coworkers for a week or two as you narrow down your options. 

- If you have two cars, you could opt to do nothing and survive with one vehicle for a period of time.  We did this when I quit work to stay at home with our firstborn.  We sold our extra car and lived with one car for several years.  

- If this is not an option, then you must find a car that fits within your car replacement fund. If you don't have a fund, then you must devise some ways to throw as much money as you can at that goal in a short period of time. 

                                   STRATEGIES FOR SAVING MONEY FAST!

1)  Cut or reduce the amount allocated to other budget items.  Eat beans and rice.  Your foot should not hit the pavement outside of  restaurants, video rental kiosks, clothing shops, or even thrift stores. Don't leave the house unless you really need to go somewhere.  You'd be surprised how much you can save in 30 days.  A "no spend" month, garners cash in a hurry. 

2)  Sell possessions.  What do you own, that others need or want?  Antiques or collectibles?  Gently worn, name brand, children's clothing goes for a good price.  Baby accessories, if they still conform to current safety standards, are a sure winner in the resale market.  Craigslist or Facebook both offer free venues for offering your items to the public. 

3)  Work overtime.  If you can't do this, get creative.  Cut lawns.  Deliver firewood.  Walk dogs.  Clean homes.  Cook for senior citizens.  Think of anything you can do for someone that they would prefer to not do themselves.  Then, offer them your services.  

                                                       PURCHASE WITH CASH!

No matter when your mechanical marvel bites the dust, shop for a new ride using only the money you have available.  No car loans.  Repeat after me!  No car loans!   A lot more than your pride is at stake if you give into the temptation to spend money you don't have, going into debt for the next seven years for an item that depreciates in value every day that you drive it.  For the next 72 to 84 months, you will send the bank money at regular intervals, praying to God that the car will not die or be damaged beyond the its value before you get done paying off that loan.   If this happens, you are upside down on the loan.  The bank will sell the car, leaving you responsible for the difference between the sale price and the amount still owed on the loan.   Inevitably you will take out another car loan, tacking on the amount still due on the first car loan.  Yes, you will be making payments on car #2, while also paying for car #1.  The only problem is that car #1 is no longer in your possession. You are paying for something that you can no longer drive or enjoy. 

There is hope!  This bump in the road does not have to drive you off track.  First, plan ahead.  Next, keep your current automobile maintained.  Finally, set aside money each year for both car repair bills and car replacement. 

Until next time, 

Do all for the glory of God, 


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