How to Save Cash for Your Next Car | 6 STEPS

One of my biggest pet peeves are car loans. I just can't stand car loans. It's like there is a way to save cash for a car. I am going to teach you how to do that in this video so you can take it step by step and literally buy your next car payment free, slap the cash down, and be done with it. Hey guys, welcome back to the Debt Free Millennials channel. I'm Justine and this channel is all about teaching you how to crush debt and live life payment free. If you are new to the channel, click to subscribe. I think one of the biggest things that we get sucked into is that, oh, well, in order to buy a car, you have to take out a car loan. There's just simply no other way. We're going to toss that idea out of the window. If you can be open-minded with this, I'm going to show you exactly how I did this with my husband where we saved cash for our 2015 Subaru Forester. Let me tell you how incredible of an experience it was to be able to walk into the dealership and say, done, got it. We don't even need to talk about financing. Okay, so the first thing that you are going to do is you are going to open up a separate savings account and relabel that savings account for the car that you want. I find a lot of power behind saving regularly when you label your savings account for a specific goal. In my case, I'm actually doing this right now for our second vehicle. We really want a Jeep Wrangler. You should check out my video on our debt-free dream car. This is a dream car of ours. I relabeled my savings account Jeep Wrangler. Whenever I see that account and I check the balance in that account, I can see, oh my gosh, I have $10,000 for this Jeep Wrangler, but I need $25,000. It encourages me to continue to save for that because it's got a name on it. I also highly recommend that when you open up the savings account that you look for one that has a high yield interest. High yield savings accounts actually have better interest rates than the national average. Typically, you're going to find high yield savings accounts with online-based banks. They don't have physical branches where you can walk in. You don't need to walk in because you can transfer funds from your normal checking account into the high yield savings account and it's done. In fact, you can do this automatically with a ton of online banks. I personally use Ally. At the time of this recording, I'm currently earning 1.5% interest on that money just by parking it there in a separate savings account. The second thing that you'll want to do is build that savings directly into your budget. It is so meaningful when you can actually write down your income and expenses. You know, we do this through Beers and Budgeting. So if you haven't already, make sure that you download the budget toolkit. It's the Google spreadsheet that I use every single month to track my income expenses and my savings. So I add a line item for Jeep Wrangler and then we make decisions together as a husband and wife and say how much money do we want to contribute to the Jeep Wrangler based upon the income that we brought in this month. We determine an amount for us that's $750 a month and then we move it over into the Jeep Wrangler savings account with Ally automatically. The third thing that you'll want to do is determine whether or not you want to purchase from a private owner or through a dealership. Now, I've actually sold my car privately and I actually put in an offer prior to when we got the Subaru Forester. I had sold my car back in Kansas before we moved to California. So Kyle and I were just using his 2003 Jeep Grand Cherokee to roll around San Diego and we knew that we would have to sell it and get something newer and something that was going to last a lot longer because, to be honest, the Jeep was on its last leg. And I had put in an offer with a woman who was selling her Subaru Legacy and I told her that I was going to give her cash value and I looked up the stats of this particular car on Kelley Blue Book and offered her a fair value of $9,000 and I told her that it was cash. Like, I had the cash. I was ready to write a cashier's check and be done with it. And she was not happy with the $9,000 amount. She thought I was lowballing her, which I wasn't. I had Kelley Blue Book to back me up on this and she said, no, I really want to keep it as listed, which was, I think, maybe $11,000. So this is a $2,000 difference, right? So she says, I have another buyer who's interested and is offering me the full amount. So I'm going to go with that. I said, okay, done. Wipe my hands clean of this. A week later, she emails me and she says, the guy's offer fell through. His bank wasn't willing to finance the loan because my car has an out of state title. Are you willing to renegotiate or talk about your offer? So I thought that's very interesting. She was going to go through this guy who was going to finance the vehicle and buy it from her instead of taking cold, hard cash from me. And so that's the power in being able to purchase a car with cash. You don't have to worry about these financing options with the bank and taking out a loan and doing all of these steps in order to make the transaction happen. It's instantaneous. So if you are selling your car and you have somebody who's offering you straight cash, you need to take them up on that offer, even if it's lower than what you priced the vehicle at. I told the woman, I was like, no, I'm done. Thanks, but no thanks. The fourth thing that you'll want to do when you're saving cash for a car is to look for used vehicles, not new. New vehicles, as soon as you drive them off the lot, depreciate in value so much. I think it's over 30% that they depreciate in value instantaneously. And look, cars are a depreciating asset anyways. The longer you keep them, the less they hold their value in general. Unless you have some amazing sports car or old classic car, they just do not hold their value. So look for used options when you're doing this. Prior to purchasing our car, we had done a lot of online shopping, just getting a feel for what our particular car was worth. And also, I highly recommend signing up for Consumer Reports. It's a $7 online subscription. And use that $7 subscription per month. And all you need is literally a weekend to do this. Use that information to see what models and years work best, some of the features that you might be looking for in your next car. That really helped us narrow down the list. We were looking for kind of a midsize, smaller SUV. And that narrowed down the list between Toyota RAV4s, Honda CRVs, and the Forester. So I highly recommend that you get an account for that once you're ready to seriously start looking. Next, you'll want to consider what the value will be of your old car. So we used Kelly Blue Book to determine the fair market value for Kyle's Jeep Grand Cherokee. It wasn't a lot. We already knew it had engine problems and a potential blown head gasket, all of these things. So we knew we weren't going to get a lot of money for that car. But we were going to get a trade-in value by working with this used dealership or selling it privately. We ended up doing the trade-in just to keep everything in one spot for us. And it was fine. I'm sure we could have gotten a little bit more from a private seller. But to be honest, with the engine problems that I was already having, we felt better just to offload it with the dealership. Also, when you pay cash for cars, the power of negotiation here is incredible. I recommend waiting till the very, very end when you're sitting down, especially in a dealership. In a dealership situation, you want to wait till the very end to talk about the fact that you have cash. Now, if you're working with a private owner, I think this is one of the first things that you can mention because a full cash offer is going to be music to somebody's ears. With a dealership, they're going to want you to finance. The reason being is because they want you to make payments and they earn money on the interest that you pay. They want to keep you on payments for as long as they can so that they get a little bit of a kickback. So, don't mention that until the very end and then that's the power of negotiation. Don't be afraid to walk away from the sell. They're going to try to keep you there as long as they can and wear you down. I have no idea why this is a sales strategy. This really turns me off from dealerships. In fact, after our last experience with buying the Forester through the dealership, I just have no interest in doing that again. It was not pleasant. We were held there like hostages for like three hours. I'm like, where the hell is my car? Take the jeep. We don't care. Let us leave and it was just a big fiasco. Don't be afraid to walk away if you can talk them down in price. That is going to get them to knock off a couple thousand dollars if you're lucky. Okay, if you are still in debt, because I realize if you're still in debt, you're making payments on credit cards, student loan debt. Maybe you already have a car loan, which I will get to in a second. But if you still have debt and you're thinking about getting a new car, here's where you get to prioritize. You have to figure out what is the most important thing that you need to take care of right now. So here's how I would prioritize it. If you truly have one vehicle or a vehicle that is your commuter, your daily driver, and it has severe problems, you've checked this out with a mechanic and you're in a situation like we were with the jeep where a future blown head gasket was going to happen and you'd be stranded on the side of the road. That is major. That's a major problem. You'll want to temporarily put your debt snowball or your debt free journey on pause. So you would be paying the minimum payments, still make payments, make the minimum payments on all of your debts. And instead you're going to funnel any extra income, look at your budget, funnel as much money as you can into this car fund. Now, if you're just simply wanting to upgrade your ride and you have an older car and maybe you need to do repairs here and there every couple of months, every six months, take a back seat on it. Still make your payments towards your debt and also set up that extra savings account and start funneling maybe a hundred bucks here and there, $50 here and there into that separate savings account. So you're still building, but you're not doing it as quickly as if you were in another situation where you would have major car problems. Minor car problems, you can still set up a savings account. The energy still needs to be focused on the debt. Then you can add that on the side. After your debt's paid off, you can funnel so much money into that car savings account. If you currently have a car loan and you're considering getting rid of it, I want to know how much do you owe on that car loan and is it worth selling for you? If it's a large car loan and it's really weighing down with payments, think like $400, $500, $600 monthly car payments and you're trying to pay off other debt, consider whether or not it'd be worth it to sell that car privately, pay off that loan and get something cheaper in the interim. Sometimes just having a cheaper car, biting the bullet, knowing what the end goal is in mind is worth so much more than driving some flashy car that you're only in for 30 minutes, an hour out of your day. It just doesn't make sense. So consider that. The very last thing out of all of this is you need to make sure that you are paying the least amount in car insurance premium as possible. Oh my gosh. I get so passionate about car insurance premiums because I feel like this is something where a lot of us don't understand or we can get easily ripped off. Be sure to check out my car insurance four-step video and then make sure you are comparing your car insurance quotes. I personally use Gabby. It's an online car insurance comparison tool and they'll tell you whether or not you're getting the best rate. If you follow my steps in learning how to change your policy, you'll see the numbers. Gabby is a great tool. I will link to my affiliate link so that you can do this comparison shopping for free and get it set up for your new car. Let me know what you think about these steps. If you like this video, be sure to give it a thumbs up. Man, I'm excited about everybody saving up for their car. Debt free, baby.