Making the Move: From Auto Loans to Paying Cash for Vehicles

When most Americans go out and buy a new vehicle, they have to get some sort of financing. This adds un-necessary interest charges, as well as forces you to get comprehensive insurance when you may not need it. It also enables to you buy vehicles that are in reality too expensive for you. It just makes more sense to save up and pay cash for your vehicles as a long term game plan. Of course there are situations when buying a newer vehicle is necessary, say when your transmission goes out, but more often than not, we control when we buy a new vehicle. Here's how you can go from paying for vehicles with auto loans to paying cash like most millionaires do.

Make Sure You Don't Have Too Much Car - If you make $25,000 a year, there's no way it makes sense to own a vehicle that costs $18,000. There's a time and a place for expensive vehicles, it's called being a millionaire. There's no reason for most of us to have cars that are worth more than $10,000 because vehicles go down in value so quickly. If you have vehicles that are more than half of your annual income, you should sell it immediately to a less expensive vehicle.

Get Rid of Your Existing Loan like it's the Plague - You're not going to escape the world of car payments unless you get rid of the one that you already have. Take every extra dime that you get, and throw it at your car loan. It might take an entire year to do so, but it's worth it. If you don't want to wait that long, there's nothing wrong with selling your car and getting a cheaper vehicle. Pay off your existing loan well ahead of schedule so that you can start saving up to pay cash for your next vehicle.

Start an Automatic Savings Plan - Once your vehicles paid off, start saving up for a new vehicle. Remember that only the money that you can save up will be used to buy a newer vehicle. If you don't save up a lot of money, you're not going to get as nice of a vehicle when the time comes to make the purchase. Make your savings plan automatically transfer money from your checking account so that you don't forget to save or let other priorities come first.