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Buying a Car with Cash: How We Did It (Guest Post)

Guest Post by Toni from The Happy Housewife

A little over two years ago we called the Dave Ramsey Show and screamed, “We’re DEBT FREE!” at the top of our lungs. It was a life changing event and a moment I will never forget. Since then, we’ve committed to live debt-free. Doing so has meant we’ve had to change our thinking about many things.

For instance, I always thought it was acceptable to have one car payment in order to have a safe and reliable vehicle. When we decided not to borrow money anymore we had to figure out a way to drive vehicles without a payment. We had purchased cars with cash in the past, but typically they were beaters that my husband drove to and from work. We wanted our next car purchase to be a late model vehicle that we could drive for at least ten years.

Is it possible to save up and pay cash for a quality vehicle in this day and age? Well, here’s how our family did it:

1) We Paid Ourselves, Instead of the Bank

When we wrote up our first debt-free budget, we included a “car payment” category. But instead of paying the bank, we paid ourselves.

We did some calculations and decided we would need to replace one of our vehicles in two to three years. Based on the vehicle we would need and the time we had, we decided to put $300 a month towards our car payment. Each month that money grew in a high interest money market account while we continued to drive around in our paid-for vehicles.

Considering the average American car payment is almost $400 a month, we were still saving money by not having a loan on our vehicle.  We figured that after three years, we would have saved over $11,000 and felt we could replace one of our vehicles with that amount if we added in the amount from the sale of our current vehicle.

2) We Got Creative and Flexible When Things Don’t Go According to the Plan

Our plan seemed great, but then I ended up getting pregnant with our seventh child and our eight-passenger suburban wasn’t going to work anymore. Suddenly, there was much less time to save and more of a car to purchase.

We had about $8000 in our car fund at the time and realized we needed about $15,000 for a van. So we decided that for a short period of time we would stop funding other savings accounts and aggressively work towards saving for a van.

We were planning on selling one of our vehicles anyway, so we estimated the selling price, subtracted that amount and the $8,000 from the $15,000 and realized we needed to save about $5,000 in eight months. That amount came to about $625 a month.

While that seems like a lot of money, it was really only $325 a month because we were already saving $300 a month in our car fund. We stopped saving in other areas in order to meet our vehicle savings goal.

3) We Did Extensive Research Before Buying

During the time we were saving for a vehicle, I spent about fifteen minutes a week checking the Auto Trader, Craig’s List, Ebay, classifieds, and car dealerships websites looking for vans. I checked safety records, resale value, and owner reviews. I wanted to know what was available and the average prices.

After several months of research, I’d learned that white vans were the cheapest, sliding side doors were hard to come by, and Fords were usually less expensive than Chevys.

When we reached our savings goal, I actively began searching websites for a van that met our criteria. After four weeks of searching, I found a van that had all of our needs and preferences and it was still under warranty.

We purchased our van almost one year ago. While it was hard to part with so much money at the dealership, I don’t ever stress about not being able to make a car payment. Paid-for vehicles are fun to drive!

Toni is an author, homeschooling mother of seven children, and military spouse. Her blog, The Happy Housewife, inspires and educates on frugality, budgeting and how to thrive on one income in a two-income world.

Photo Credit: Emilio Labrador

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  • Lauralee says:

    Yay!!!! This is an awesome, inspirational story!!! We too are working on being debt free! Using Dave Ramsey’s plan we have paid off all of our credit cards, misc debt, and soon we will be down to only our house payment and a student loan!! This is very exciting as when we started D.R. we had 32 bills. Our BIG step we are taking is selling our vehicle and going down to 1 vehicle that we own. We are also “sick” of the car payments and love how it feels to not owe money on things. By selling the 2nd vehicle we will be able to pay off the one we are keeping. We do not have children and my husband has a car he can use for work purposes which does help. We will also have a “car savings” acct soon so that we can upgrade to something that works a little better for both of us. I LOVE the inspirational video on DR about how to get cars without payments! We watch it any time we feel a little frustrated!! Thank you for making this blog inspirational and thank you for sharing this AWESOME story!!

  • Anjanette says:

    It’s even more impressive that it was a large *van* they bought with cash! We’re living w/one car and looking at purchasing a second late summer/fall w/cash. Our goal is just $5000!

  • Rachel says:

    This is exactly our plan. Once we get my student loan paid off, we will pay ourselves until we have enough to buy a pre-owned vehicle outright. I am excited to see how it goes!!!

  • Kassandra says:

    What a fantastic idea! I would have never thought to “Pay Ourselves, Instead of the Bank”. What a smart move! My husband and I are making a vehicle purchase, utilizing cash only, later this month. This post is so inspiring and couldn’t have come at a better time for me! Thank you for sharing!

  • minnie says:

    Yes, we have done this also. It feels very, very good to be debt free. We have made mistakes along the way, but we dust ourselves off and move on.Living below your means is right.

  • Wani says:

    Great post! My parents were living frugally long before Dave Ramsey made it “cool”. I am so thankful that they taught me to be a saver instead of a spender. While my husband and I are still on our way to being completely debt free, we are pretty proud that our only debt is our mortgage. Thanks for sharing your story.

  • TRIXIE says:

    Hi Toni!

    Great post, thanks for sharing. Isn’t it a great feeling to own a car debt free?! Reading stories like yours encouraged me to do the same thing last year to get my new-to-me car. Hopefully, this time next year lots of others will be writing about how they did it based on your encouragement!!

    In our situation, what worked best for us was to find creative ways to earn the “extra car payment to ourselves” money. Here’s a link to how we did it, in case anyone is interested.

  • Danielle says:

    Wow, this is exciting. We are saving for a new car/house in the next few years, and our cash is in a regular savings account with <2% interest (bad, I know!). I wish I could find a better place to put it where it would grow faster … any tips?

  • Beth says:

    Thanks for the great ideas! This is something my husband and I have been thinking about a lot recently. He is in his first year as a lawyer, and I am in my last year of graduate school, and so we’re slowly trying to get our feet under us. Now that there is a little extra room for saving for larger purchases, we just need a plan on how to go about it. This is a great jump start for us to begin our plan!

  • Our second car was burning oil and was about 14 years old when we really needed to replace it. We had some cash, but not a lot. Our solution? We carpooled most everywhere and only drove it when we had to until we had saved up $6000, enough to buy a reliable used Buick Century. It took us a couple years, but I am thrilled to not have a car payment!!

    Someone who knows cars says he can’t believe my “Red Car of Death” lasted that long–it was only the grace of God and a lot of faith!!


  • kelly says:

    That is a great story. My husband and I are on our third week of FPU.My husband was very reluctant because he loves to spend. But, I prayed on it and this week when we came back from classe he was actually excited. I am very excited to hear stories such as this one. I am looking forward to screaming into Dave’s ear too.

  • Ellen C says:

    Thanks for sharing this post! It was a huge encouragement!!! My husband completed Dave’s Financial Peave Univ last year and are currently working on baby step 2. We should be debt free later this year and we are elated to say the least. We are also expecting our first child in June, so are planning to buy a new car at some point. We have one paid for car and one paid for clunker (while going through FPU we sold my husband’s nice new car payment truck and bought this clunker in cash), and this post was really an encouragement for us to pay that debt, save to purchase a car in cash and not get back into another car payment. Love it!!!

  • Megan says:

    Good for you! This is a great inspiration to me. We too are debt-free and looking at buying another car. We plan on saving for it during my husband’s upcoming deployment and buying a used Buick LaCrosse or Honda Accord when he gets home. Can’t wait to pay cash for it!!

  • Mike says:

    Great post. What kind of deal can you get walking into a dealership with a pock full of money? How much of a bargain did they give you knowing you were going to pay cash for it instead of finance it?


  • Toni is right, paid for vehicles are so much fun to drive!

    Both of our vehicles are paid for. And each month we set aside funds for their eventual replacement. Currently we are doing what Toni and her husband did when they found they would need a “new” vehicle sooner than expected. In the last six months, my husband’s truck has needed some repairs that indicate to us that it may soon be time to replace it. So we’ve directed all extra money each month to the replacement fund for that vehicle.

    It’s really fun to watch that fund grow even faster than it was before and know that even if his vehicle dies tomorrow we have the funds to replace it without going into debt. And the longer his old truck holds together, the newer the vehicle we’ll be able to replace it with.

  • tonya says:

    very impressive! Congratulations!

  • We purchased our used Toyota Matrix in 2008 (it was a 2006 model), for CASH. We went in with confidence, negotiated a price, and when they started to mention financing we said, that’s not necessary. We’ll be paying cash. It was better to hold off on mentioning the “cash” aspect because they make more profit on financing than on the vehicle. That gave us the upper hand- we got the price we wanted for the vehicle we wanted and the savings to boot!

  • Angela says:

    This is wonderful. We made our DEBT FREE scream on air this past June and have an active car replacement fund. We don’t contribute monthly, but put a portion of bonuses and extra income in there to build it to where we think we need to be 2 years from now (when we think we’ll need to replace our current paid for car).

    S0, do you still pay yourself the $300 car payment to replace your other car or have you shifted the funds to some thing else?

  • Jennifer says:

    We paid cash for my husband’s car almost 2 years ago. We aggressively saved for more than a year and when an opportunity came along to purchase a late model, new to us car from friends who were moving, we were ready. $12,000 was a lot of money to save and a lot of money to part with, but we were so proud of ourselves and so happy with our purchase. It really is a great feeling.

  • Laura says:

    thx for the guest post our car is about to be paid off and it will officially be ours in the near future we are planning on getting a new one and i enjoyed the fact that it is possible to pay with cash

  • Lana says:

    We have bought one car on payments un the 32 years we’ve been married and we will never do it again. Last time we had a need for a car we prayed about it and asked the Lord to show us the right car to buy. A few days later a friend called and asked me if I knew of anyone wanting to buy a car and it was exactly what we needed and in the price range that we could write a check for. It has been a good vehicle for several years now. I love it when God answers prayer like that.

  • Laura says:

    Thanks for the post! What a great blog, Toni! I am ready to make homemade tortillas and refried beans now. Thanks, Crystal, for introducing me to another great site. Blessings!

  • Allison says:

    Awesome! Last year we got debt free and paid my parents $1000 cash for a 12 year old car with our tax return , and it was so much better than squeezing three car seats into a 2-door Honda Civic! This year our tax return is covering brand new tires (one already blew and another has metal coming out of it) plus other necessary repairs. But we are still debt free! After years of credit card and medical bills looming, it was such a nice feeling. We are also catching up on our “wish list” including a piano for me, since I haven’t had one for about 9 years. We will still be putting about $5000 in a savings account, which will keep us afloat during bad weather (my husband works in construction). I’ve learned to stretch our non-existent shopping budget with coupons and deals, and that is the only way we survived. I’m still wishing for a minivan, but maybe we can do that next year! : )

    • Courtney says:


      Check out Craigslist if you have an active one in your area. There are FREE pianos to be had quite often in our area (a major city) and it might be worth the cost of a tuning and renting a truck to be able to get one for free!

  • Sandy says:

    Great post. We bought a van last summer with cash and it has been a great relief to not have a car payment. And we have been budgeting money every month for a new car even though that will be hopefully 7+ years away.

  • Anonymous says:

    I really did enjoy this post, but I feel like so many people are left out. I mean, I work in a blue-collar environment. Many people where I work (over 50%) average a $15,000/year salary.

    What about people who barely make, say, $1,200 a month?

    I can make a conservative budget and say that they would pay approx:

    $400/mo. rent
    $150-$200/mo. utilities
    $200/mo. car expenses (insurance, gas, maintenance)
    $100/mo. groceries (if they’re really good with coupons!)

    That would leave $300 a month IF they already have a “paid for” car, not to mention medical expenses, childcare if they have young children etc. How do people in these situations break free to save money?

    • Trixie says:


      I was in your position several years ago so I understand how difficult it is to squeeze some savings into your budget. Our situations are probably quite different, so what worked for me may not work for you, but I’ll share the three things that helped me during that time.

      1. I searched out ways to earn extra money. Even $20 extra is a help! This brought out a lot of creativity in me that I didn’t know I had and was a lot of fun. A great self confidence booster!

      2. My sister and I roomed together for 3 years. We split our $465 2 bedroom apartment rent so each of us only paid $232.5 a month

      3. Eventually, I was able to secure a higher paying job with more earnings growth potential. The higher salary didn’t come quickly though — it took years.

      Hope this helps. Whatever you do, don’t get discouraged. You can do it too!

    • Lauralee says:

      Hello there
      I understand where you are coming from with the limited income comment. It looks like you have a budget planned out and that you are conservative with your money. For me I picked up some small jobs to help push me over the edge so I could gain some ground.
      Some ideas that friends helped me with included: doing laundry for someone who would normally have to go to the laundry mat/doesn’t want to do it and will pay you. There are several people in the area I live in that have to use the laundry mat. If you average out how much it costs them to do so and take a few dollars off you can make some money from the comfort of your own home. The advantage to them is they don’t have to sit at a laundry mat and their clothes get folded and done by someone else. I also found a few people who needed someone to clean for them. I made some extra money and I was able to pick the hours that worked best for me. I also made bracelets, book marks, and a few other crafty items and asked a person if I could sell them in her store and she could keep a portion of the profits. I baby sat on Friday nights and Saturday nights. I have watched dogs for people and checked on houses for others. My husband has shoveled drive ways. I guess these are some ideas that have worked for us. I am sure there are thousands of other ideas. My favorite part about how we do it is that it fits in our schedules. Also moneysavingmom has a page where you can read about some ways to make a little extra income. It sure can go a long way.
      The most important thing I think we did was to pray about it. And I have to say that Dave Ramsey helped us realize spots that we didn’t think about for ways to save.

    • Sherri says:

      @Anonymous, I think this is where folks have to get very creative. Can mom babysit or sell on eBay to generate some extra income from home? Can Dad do odd jobs on the weekend? If it can’t be squeezed out of the regular budget, then what about the tax refund? At this income level, one does not actually pay federal income taxes, and Earned Income Credit gives you back money you didn’t pay in. That can be a few thousand a year to put into savings. Oh, and just wait for the IRS to send the check to you- don’t use the refund anticipation loan that tax preparers push (which takes a big chunk out of your total).

    • Lane says:

      I’ve read of people who were in situations similar to this and had to take on any extra employment possible…selling things on ebay, delivering newspapers, etc. and also used lots of other techniques like working something out with the utility companies or childcare facilities (both of which may not be flexible, but worth a shot because some are)…and of course these people weren’t able to do it with the speed of others who make more, but still eventually able. Truly, every little bit helps…$2 here and $5 there. It all adds up in the very very very long run. I hope this helps. Dave Ramsey’s Financial Peace University can really give you some great ideas and you’d be surprised at just what your brain can come up with.

  • Karen says:

    We are saving up now to pay cash for a car. Thanks for the tips. We will be putting the car on our Upromise Credit card, then transfering the cash to the CC company on the same day. This will give us 1% of the car price into our college savings account.

  • Swap Savers says:

    Great post. We always pay in cash for our cars too.

  • K. Rock says:

    This was very motivating. Thanks for the suggestions.

  • Crystal says:

    Excellent Guest Post – Thanks!! I love the diligence – I think this is something that people have a problem with – once they decide they want something – they want it NOW! I love that you feature inspiring stories of what can happen when you pace yourself and set goals. Thanks!!!

  • Amanda says:

    Thank you for this encouraging post. My husband and I are working hard toward becoming debt free. We started the year by reviewing our debts and setting are concrete goals for paying them off. I am sure we can pay down our debts but the need for another, larger van looms in our future. Thanks for the encouragement to stay the course, to accept children as a blessing, and to work hard to avoid the curse of debt!

  • CC says:

    We’ve only bought cars with cash. That said….. we’ve never gotten a new car! 😉

  • Sherri says:

    Great post! You explained yourself very well. We did pretty much the same thing when we bought our last 2 vehicles. We also found ourselves expecting a baby and needing purchase a van sooner than we had intended, but we were able to “borrow” the remainder from ourselves (our long-term savings) instead of from a bank.

  • We paid for a new SUV for me with cash this summer, and it felt FANTASTIC!

  • Awesome! My hubby’s car is on its last legs, so we started saving up enough cash to pay for one up front. It has lasted longer than we thought with a few repairs, and we’re determined to drive it to the ground. We are aggressively paying down our mortgage this year, as we’d like to be able to be completely debt-free by Jan 2011! What a great feeling that will be!

  • Heather says:

    Toni love the article. When we were pregnant with child #4 we too needed a new vechile. I wanted an 8 seater suburban and to pay cash. We looked and looked and prayed and then found one for a price we could pay cash. You have to be willing to go with the flow when paying cash for a car and make some sacrfice. It was white (I did not want white) had no 4X4 ( in our state kinda required) and was not brand new (my husband wanted that). It fits us all and gets from point a to b and I don’t have to budget a car payment so I am happy.

  • I agree that paid off cars are fun to drive. I am actually trying to do a bunch of online offers to save up for my “new to me car”. In the meantime I am happy with my 95 Honda Accord. 🙂

  • Ashlea says:

    I love hearing stories like this, although at times they really frustrate me, too. It seems like most of the stories I read these people make quite a bit of money. I am a stay-at-home mom and while my husband doesn’t have the job of his dreams, he has a stable and decent-paying job. We can’t wait to be debt free, but it seems so hard to get there! We only have 2 kids with a 3rd on the way and I can’t imagine having that kind of money to save and still be able to buy household things even without debt. I would love to hear stories from one-income families that don’t make a lot. We live in a small town that has no jobs available at this time and pays very poorly compared to other areas. I would love to hear stories from other families like ours. But congrats on being debt-free and paying for a car with cash!

    • Ln says:

      Hi Ashlea…we’re in the same exact boat as you with the exception of me not being pregnant but we do have 3 children under 5. We don’t have a lot of debt (no credit card debt…just 2 cars and student loan.) I think we should email each other and come up with a plan that fits our families and keep each other motivated and accountable. I’ve seen other people do things like this on blogs but I’ve never joined in because when there are so many people doing it, it seems less personal to me (and that there is less accountability) AND I think I would be motivated to have a family so similar to mine doing it at the same time. Think about it and if you’d like to at least talk let me know and we’ll figure out a way to get in touch. Have a great day!

  • Heather says:

    What a great idea for being debt free! I have been without a car payment for over a year and have been thinking og getting a new one. Just a great way of doing the Math and keeping that money in your pocket and not the bank or finance company!

    I also mentioned your website on my blog for teachers adn others who are trying to save money!

    Many thanks!

  • Heather says:

    What a great idea for being debt free! I have been without a car payment for over a year and have been thinking of getting a new one. Just a great way of doing the Math and keeping that money in your pocket and not the bank or finance company!

    I also mentioned your website on my blog for teachers and others who are trying to save money!

    Many thanks!

  • Jenny says:

    That is awesome! We have been car payment free for a few years now, but know we’ll need a car in 2 to 3 years. We are paying down debt and as soon as that’s done this Fall, that money will go towards the car fund!

    It’s so exciting to not be using credit anymore and to think we’ll be debt free this Fall! Thanks for the tips.

  • What an inspiring story…thanks for sharing. I love BOTH of your blogs!

  • Amy says:

    Any thoughts on where to find a decent interest rate for savings? We are in the “saving for a car” stage but are having a hard time finding anything that gives more than 1% or so return (kind of hard to actually build money that way!)

  • Lisa says:

    Thanks for the hints, especially the last two! We are finishing off paying off a credit card then will be aggressively saving for a newer car. We are also Dave Ramsey followers, but not quite out of debt.

    Did you end up with a new car or used?

  • Patti says:

    Wow! Great post. You have inspired me to start saving up.

  • Pam says:

    It is a great feeling to be able to pay for a vehicle in cash instead of having to make payments towards a loan. I totally agree. My husband and I did the same thing. We did a ton of research and compared several different options before making our purchase. It was hard for us to let go of so much money all at once, but we knew we didn’t want to have to pay any interest and it made the most sense to us financially.

  • The average price of a new car in the U. S. is $28,400 and as soon as you drive it off the lot you’ve already lost a bundle. We only buy used Volvo station wagons. They’re safe, they last forever, and they don’t cost very much. Plus they can haul a lot of yard sale treasures.
    Here’s how it breaks down. We buy the wagon for $6,500 and keep it for two years. Then we sell it for $3,000. That means we have had a good quality vehicle for $3,500. Of course, there are always repairs, but we’re still way ahead of the game.

  • Great post! I have never borrowed money for a car and I find I save money all the time this way on registration, insurance etc and the money that I spend on repairs by driving an older car are much, much lower than any car payment!

  • Suz says:

    Amen Sister! A paid for car is the best! We paid ours off several years ago with money we had in the bank… now we are working on building that nest egg again for the next big expense that comes our way.

  • Heather H. says:

    I love this post! I actually just got The Total Money Makeover book in the mail yesterday! We’re working our debt snowball & can’t wait to be DEBT FREEEE!

  • Ronica says:

    Isn’t that a great feeling!! My husband and I made our last car payment 6 or 7 years ago, and when we did we set up a bank account we call our “car fund” and we have $300 automatically transferred into it each month. It really works! Want to know what our last purchase was? A white van!! The system really works!

  • Lindsey says:

    great post! paid off cars really do ride better! hope you inspired others to try it out! cheers to dave ramsey’s baby steps too!!

  • anonymous says:

    How are you supposed to save anything when your bills are at or above what you bring home each month? What do you do in that situation? My husband and I bring home $1300 a month and just our bills, rent and car payment are equal to or more than what we bring home each month. It is impossible to save at that point.

  • Homestead says:

    There is another added savings posibility with a paid-for vehicle…. insurance. You don’t have to have top of the line complete coverage (what’s it called?) when the vehicle is paid for. Talk to your insurance agent and see what kind of coverage works best for you. We have what I call hit-a-deer coverage on our nicest vehicle (with a fairly high deductible) and liability on all the rest. The amount of money we’ve saved doing liability-only covers the cost of replacing them at this point. (Saved, of course, Ramsey-style… in a money market account.)

    And can I mention the power of the automatic checking account deduction? We have $500 taken out on the 15th and transferred to our money market account (we can write checks out of it) and when that account hits a certain amount the money (right now we have it set at anything over 5k) it goes into a better interest earning and less liquid account. And we can stop the $500 deduction with a phone call so if we have a super-tight month we can stop it for that month (although we’ve never had to do that it is nice to know we could).

  • Janice says:

    I have purchased three cars without having a loan. Two were brand new and the third was a one year lease. My parents never had any type of load/debt and they really encouraged my 7 siblings and I to pay cash whenever possible and to save money. It is a great feeling to be able to write a check that covers the price of a car.

  • LANA says:

    We also have no car payment and drive a 2008 Mazda 5 that we purchased brand new (I thought I would never own a new vehicle) which replaced our 1997 Saturn. We didn’t save monthly like you did, but instead, took advantage of the cheap mortgage rates and renewed our mortgage for a much lower rate that freed up money for a new vehicle without adding any amount owing to our mortgage- brilliant I thought:)

  • Shaun McGowan says:

    Smart move! This is a great inspiration to me. We too are debt-free and looking at buying another car, It’s really fun to watch that fund grow even faster than it was before and know that even if his vehicle dies tomorrow we have the funds to replace it without going into debt.

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