How to Pay for a Car in Cash

Besides housing and food, car payments can equal a large portion of our budget. So, how can you pay for a car in cash instead?When it comes to most American household budgets, auto loans are high up on the list of items eating away at our money. Right after housing and food costs, car payments rank right up there. But what if you didn’t have to worry about a car payment anymore, so that you would be able to keep more of your money each month? Buying a car in cash is what we decided to do to get us closer to the FI life we want to live. So, how can it be done?


The first step is to plan for the purchase of another car well before it has to be done. Even if you have a new car right now, at some point in the future, that car will need to be replaced.

So determining how long your current car should last is the first step. Here is an example of how that could look, based on my current vehicle:

  • Current car – 2009 Honda Pilot (165k miles)
  • Average Honda Pilot longevity – 300k miles or more
  • Miles per year driven, on average (165k) / 10 years = 16.5k miles per year
  • Average longevity (300k) – Miles currently on the car (165k) = 135k miles left
  • Total miles left (135k) / average miles per year (16.5k) = 8.18 years left

We will presume that we are planning to purchase the same type of car. Therefore, the next step is to determine approximately how much the replacement vehicle would cost at that future point in time, using the average automobile inflation rate. Here is how that could look, using our current example:

  • 2019 Honda Pilot (brand new) = $31,450 on average
  • $31,450 x .12% (automobile inflation rate) x 8 years = $31,753

Next, you would need to determine how much you should be saving each month to reach the amount you will need to purchase another car when the time comes. Here is how that could look:

  • $31,753 / 8 years = $3969.13 annually
  • 3969.13/ 12 months per year = $330.76 per month

Now that you know how much you need to save each month to potentially purchase a car in cash, will your current budget allow for that savings rate? If not, consider looking at used cars in the future instead of a new car, because that can really save you a lot of money!

How to Save The Cash

Once you have figured out how much money you will need to save to get your future car in cash, where is the best place to put it? I have found that if I put it in my regular savings with everything else, it just gets co-mingled and I forget how much is saved for what.

This is where creating savings buckets come in handy. And one of the best ways I have found to do that is with Digit.

It is easy to use, on your PC or your phone. I can easily transfer money into my Digit savings buckets and when I am ready to take the money out, it is an easy transfer back. It usually takes a few days to fully transfer one way or the other, but that is a good fail safe. This way, I can’t make rush decisions and blow money on something that I wasn’t really saving for.

Car Search

One of the most important steps, after ensuring you have the cash you need saved, is the car search itself. For those of us who live in larger metropolitan areas, buying a car where we live is usually not the best option. The new car, and even used car, prices can be astronomically inflated in larger cities.

This is why choosing your search area can really make or break getting a good deal. So I have found that running a search with a 200 – 250 mile radius from where I live nets me the best results. The sites that I have used in the past to get me great results are:

I usually run a search in all 4 sites, just because they can have different dealers on each of the sites. And you can set notifications to be sent to you for specific vehicles you are interested in. They really make it so much easier to find the right car for the right price these days. And I just love it when things are made easier for me.

In fact, I have saved close to $8000 on a new car purchase before just by driving an hour away. I am a huge fan of saving money, and especially when it comes out to be thousands of dollars!


Even with finding great deals on cars by searching further away, there is still room for good old fashioned negotiation. I realize that you may already be getting a pretty sweet deal with the car you have found a couple hundred miles away. But why stop there if you don’t have to?

By running the search through different websites, you get the whole price range of what the specific car you are looking at is running. This way you know how much room you might have to negotiate an even better deal.

Plus, most of these sites let you know how long the car has been on the market. Just like a house, the longer a car has been on the market, the more negotiating power you usually have. So use that to your advantage to see if you are able to save yourself a bit more money.

After all, the more money you are able to save on this deal, the more of the money you set aside for a replacement car you can allocate to another goal instead. And it never hurts to ask, so what have you got to lose?

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Buy a Car in Cash!

While dealerships make it so easy to get a car loan these days, most of us are working hard to keep our money and reduce our monthly expenses. So getting rid of a car payment by purchasing a car in cash only helps us get closer to our goals faster.

There are some fairly easy ways to do this, with proper planning ahead of time. Remember these steps to purchase the car you want, solely in cash:

  • Make sure to figure out exactly how much you will need to have saved ahead of time
  • Look at used car options, instead of new cars only, to potentially save a ton of money
  • Expand your search area to a 200 – 250 mile radius from where you live
  • Don’t be afraid to negotiate, even with lower prices

If you follow all of these steps, you should be able to purchase the replacement car that you want and need, when the time comes, with little to no monetary discomfort.

Have you purchased a car in cash before? If so, what were your tips and tricks to make it a successful purchase?