Buy the Car of Your Dreams ... With Cash

A wise man once said, "No one ever got rich and had a car payment."

Do you think it's impossible to buy a nice car and pay cash for it? Depending on your financial situation - and your current auto situation - it isn't just possible; it's the smart thing to do. Though it can be a little time-consuming, it's well worth the effort. And once you reach the position that you're paying cash for cars, it's a cycle you never have to break. Here's how to do it.

Let's say you own a six-year-old car that is valued at $3,000. The car is in fairly good shape and will likely last - with normal maintenance - for another four years. Imagine yourself walking onto a new car lot and finding the car of your dreams.

"It is a beautiful car," the salesperson says. "How much can you afford ... per month, I mean?"

Those are magic words for car salespeople. If they can get you to commit to spending a certain amount per month, you're sold. At that point, it's just a matter of determining which car you'll buy.

"I could probably pay $250 a month," you reply.

"I don't know if you can get that one for $250 a month," the salesperson says. "I know you really like this car. Do you think you could go to $275?"

You spend about two seconds thinking about it. Of course, you can go to $275.

"Now, over here, we have the same car but with leather seats," the salesperson says. "Wouldn't you rather have leather seats? If you can push this to $300 a month, you can get leather seats."

OK. Now, you've committed to $300 per month. And, here's where you take control of your automotive well-being.

You leave the lot, having convinced yourself you could afford to pay $300 per month for a new car. The first step is to buy a cookie jar ... or, if you don't have the self discipline, a piggy bank that you have to break to open. One where money goes in easily, but doesn't come out as easily.

Now, you make yourself deposit $300 each and every month into that bank. And you continue driving your six-year-old car. You drive it for four more years. At the end of that time, it's definitely ready to be replaced. So, do you go back to visit the salesperson at the dealership? Will you soon find yourself strapped with a five- or six-year car loan?

Absolutely not.

Now, you break the bank. Inside, because you're disciplined and saw the bigger financial picture, you find $14,400 in cash. Let's say you sell your 10-year-old clunker for $600. That gives you $15,000 in cash to go car shopping.

Does that mean you pay $15,000 in cash and take a loan to purchase a $30,000 auto? If you're saying yes, you're missing the big picture. The goal is to have a paid-for car. So, you go and pay cash for a $15,000 car. In a lot of cases, just the sight of green money - especially when you're talking about thousands - can bring on a much better deal for the buyer. It's entirely possible for that $18,000 sticker price to be had for the $15,000 you have in your hand.

So you have a paid-for car. Does the process end there? Not if you'd like a nicer, paid-for car.

Since your car is paid for, you get to retain control and keep paying yourself $300 a month for your next car. If possible, add more to it. Maybe you can afford to save $350 a month at this point. If you keep the $15,000 car for seven years, your "cookie jar" should hold $29,400. Chances are, you're now able to pay cash for that $30,000 you originally wanted.