Car

Here are two rules of thumb to help guide you to a smart car purchase:  

1. Save up and pay cash for the car. Do not take a car loan or car
lease. 
2. Buy a reliable, slightly used vehicle that fits your needs. 

In about five years, that “new” car will have lost 60% of its value.1 Plus, you
can find like-new used cars that are just as safe and dependable as a new car
at a much cheaper price.

Five steps to buying a car:

1. Set a Budget. How much do you have saved in cash? look for a car that fits your
needs and your budget. Write down some of the features (like good gas
mileage, safety features or plenty of cargo space) that are most important for
you in a vehicle.
2. Shop for a used car. Check:

 Independent used car dealerships. You know your limit and needs; you can
walk away
 Private sellers: chances to negotiate. Look around town and facebook
 Online car retailers: carmax, no negotiating and higher price
3. Check the car’s value: Kelly blue book, You’ll also need to get an idea of
how much you’ll spend to maintain the car and what long-term repairs you
should expect for the make and model you’re thinking about buying.
4. Inspect the car yourself:
 Go on a test drive. Does the car drive smoothly on flat roads? Do you
hear the engine rattle when you drive? And what’s that smell? The test
drive is like a first date, so keep an eye out for any red flags.

Buy a vehicle history report (VHR). Services like Carfax provide

details about a specific car’s ownership, accident history, title status and
mileage.

Take the used car to a reputable mechanic. Always have a mechanic

inspect a used car, no matter the condition. A good mechanic will be
able to tell if you’re about to buy a reliable used car or a headache on
wheels. According to the Federal Trade Commission (FTC), you can get
 a standard vehicle inspection for about $100.2 So don’t get taken for a
ride by a mechanic charging a couple thousand dollars to inspect it for
everything under the sun.
Negotiate the best price: Know how much the car is worth, point out any
problems associated with the model, and let the seller know you’re paying in
cash to help lower their asking price. But always be willing to walk away if the
seller just isn’t willing to budge.

Car insurance

Liability + Collision + Comprehensive = Full Coverage

Liability Coverage: If you’re in an accident that’s deemed to be "your fault,"

liability insurance covers third-party costs you’d typically be responsible for
paying. We’re talking about things like the other driver’s medical bills or repair
costs due to the accident. There are two types of liability coverage: property
damage liability (costs related to getting the other driver’s car fixed) and bodily
injury liability (costs related to their lost wages or medical bills). It’s mandatory
in most states, and you’ll want to have at least $500,000 worth of both types
of liability coverage.

Collision Coverage: No matter who’s at fault, collision coverage pays to

repair or replace your car if you’re in an accident. It’s usually worth having
since it’s so affordable, but you can consider dropping collision coverage
to save money if you drive an older car or a beater.

Comprehensive Coverage: Whether it’s theft, damage from a fire, a natural

disaster or even a tree limb falling on your car, comprehensive coverage will
pay to replace or repair your car as long as the damage isn’t due to a collision.

Now, that’s not all. You can include other types of coverages in a
policy. Some are optional (like rental reimbursement and roadside
assistance) and some (like uninsured motorist coverage or personal
injury protection) are legally required in some states. To be safe, make
sure to talk with an independent insurance agent to find out which
coverages are right for you and which you can skip.

Saving Money on Car Insurance 

 If you’ve kept your car insurance on cruise control for a while, that means you
could be spending hundreds of dollars more on car insurance than you need
to. Here are three things you can do today to start saving money on car
insurance:

1. Shop around for car insurance. If you have a clean driving record,
you could save hundreds of dollars on auto insurance just by taking the time
to compare quotes. That’s why it’s a good idea to look for a better deal at least
once each year. You have nothing to lose and potentially hundreds of dollars
to gain!
2. Raise your deductible. If you have a fully funded emergency fund, you
should look at raising your deductible. Higher deductibles mean lower
premiums because you’re taking on more risk, and you can afford to do that if
you have money set aside for emergencies. We generally recommend
having a $1,000 deductible because that usually means you’ll pay a
lower premium. 
3. Get rid of insurance you don’t need. Like we mentioned earlier, there
are some kinds of insurance you need to have, and there are others that
might be worth dropping altogether. Based on your situation, you could get rid
of stuff like rental car reimbursement, roadside assistance and guaranteed
auto protection (GAP).

Whether you’re shopping around for new car insurance or you just want to
check if you have the right coverage in your current policy, skip the hassle and
get an independent insurance agent to shop around for you.

Car Maintenance 101

Car maintenance isn’t optional. It’s necessary. Why? Taking care of the little
things—from oil changes to tire rotations—improves the safety and
performance of the car, saves you expensive repairs down the line, and helps
the car retain its value so you can sell it for a higher price

Change the oil. Since oil affects a lot of your car’s functions, oil problems can
be some of the costliest car maintenance issues to fix. So make sure you
change the oil every 5,000 miles or follow what is recommended by your car
manufacturer. It’s better to spend as little as $25–30 to get the oil changed
than to risk wearing out your engine. (Learn to do)
 Keep the battery clean. If you don’t, the battery could develop a crack
or not function properly and leave you stranded. Test your battery twice a year
and inspect it for corrosion (which looks like a white or bluish powder).
 Replace your air filter. Your air filter keeps pollutants from coming in
through the vents, so you’ll want to change the filter every 12 months or
12,000 miles. Not only will you breathe easier, but it’ll also keep your air
conditioning system from experiencing major problems. (can do)
 Change the windshield wipers. When you’re driving, you need to be
able to see the road. Thank you, Captain Obvious. It’s a good idea to check
your windshield wipers at the change of each season and replace them when
necessary—and clean the windshield inside and out while you’re at it! (Can
do)
 Get the brake pads replaced. Hear a squeaking sound when you hit
the brakes? That means you might need to replace your brake pads. While a
new set can cost up to $300 for all four wheels, you don’t want to know the
price tag of rear-ending that BMW because your brakes failed you. (Learn to
do)
 Have the tires rotated. Did you know you can extend the life of your
tires—and save money on tire replacements—by rotating them every 6,000 to
8,000 miles? And while we’re talking about tires, make sure you check the air
pressure in your tires every couple of months and keep the spare tire inflated.
 Have the suspension system checked. Your car's suspension system
is responsible for smoothing out the ride and keeping the car in control. Don’t
take that for granted! Check the shocks and full suspension system every
15,000 to 30,000 miles.
 Check the coolant. The coolant affects everything from the heater and
air conditioner to the radiator and water pump. It’s a good idea to check your
coolant twice a year—once before the warm weather hits and again before the
cold weather swoops in.
 Check the spark plugs. Is your engine giving you trouble? A common
cause (and easy fix) is the spark plugs. Check and change the spark plugs
about every 30,000 miles. Swapping out a $15–30 spark plug is a small price
to pay for avoiding major engine overhaul, which could cost you thousands.
 Have the belts and hoses inspected. Replace your timing belt every
60,000 miles and your serpentine belt every 40,000 miles. It’s recommended
you change your hoses every four years or whenever one shows signs of
wear. When a radiator hose fails, it could cause your engine to overheat and
not run at all. Not good. 
 Take your car in for a full-service inspection. Think of car servicing
as an in-depth physical that takes a look at the health of your car. A full car
servicing with a reputable mechanic will include dozens of systems checks
 and adjustments designed to help keep your car running smoothly. How often
you have your car serviced depends on what kind of car you drive, how old it
is and how many miles it has on it. So check your car owner’s manual for a
car servicing schedule.  
Where to go?

 Mechanic: Building a good relationship with a trusted, professional

mechanic can save you a lot of headaches down the line. You’ll want to take
your car to a mechanic for tune-ups (as recommended by your car
manufacturer), fixing mechanical and electrical issues and getting major
repairs.
 Tire Store: Nothing is more annoying than having a nail somehow get
stuck in your tire. Tire retailers like Firestone or Goodyear are good places to
go to fix any problems with your tires—from rotations to replacements.
 Auto Parts Shop: Places like AutoZone or Advance Auto Parts offer a
bunch of free services, like car battery installations and starter and alternator
testing. 
 Your Own Garage: Yeah, there are some things you can take care of
right in your own garage or driveway! Changing your air filters and windshield
wipers are pretty easy, and you can learn how to do it after watching a couple
of YouTube videos. But safety always comes first. Don’t try to tackle any
repairs or replacements you aren’t comfortable doing yourself!

Should I repair or replace?

**Here’s the general rule of thumb: If the cost to repair your car is greater
than what the car is currently worth, it’s probably time to replace the car. If
you’re in the debt snowball process or trying to save up for a car and aiming to
extend the life of your existing ride a little further, we get it. Just know that you
need to get a sinking fund in place to replace the car as soon as possible.

Repair or Replace?
To calculate whether or not it’s worth replacing, you’ll need to do a little math. Do these three
things to help you make your decision: 

1. Estimate the value of your car. How much does your car cost now without the repairs?
Kelley Blue Book can help you get an idea of how much you can sell your car for today.
2. Estimate the cost of the repair. Go to your mechanic and get an estimate of how much
it will cost to repair your car. For example, there’s a huge difference between the cost of
putting in new brakes and replacing your entire engine.
3. Determine how much value your repair will add to your car. Just because you spend
$1,000 replacing your car’s air conditioning unit, it doesn’t mean you’re adding $1,000 of value
to your car. Your mechanic should be able to give you an idea of how much value and longevity
your repair will add to your car.
Let’s say you drive a $4,000 car and you take it to the shop after you notice some strange noises
coming from the engine. Your mechanic takes a look and breaks the news: You need a new
engine. The estimated cost? $2,500. Ouch. 

You ask how much value a new engine would add to the car’s value and he says it’ll add another
$1,000. Since this is an older vehicle, you’re probably leaning toward selling the car. You could
sell your car for around $4,000 and take the $2,500 you would’ve used to replace the engine and
buy a $6,500 car instead.

But remember, the math can only show you so much. Other factors, such as repair frequency and
what you owe on your car come into play as well. Keep these in mind as you’re running your
numbers.

Selling a Car
Here are some tips to make sure your car sale goes as smoothly as possible:

1. Set the right price. It’s easy to get emotional thinking about all the
memories you’ve had with Big Red or Old Blue. But you have to put aside
your feelings when setting the price for your car. Buyers don’t care about your
feelings. Sorry.

The good news is that online sites like Kelley Blue Book or NADAguides can
help you see what your car is worth in a matter of minutes. You can
also check out what other sellers are asking for cars similar to yours. 

When you set your price, be sure to leave wiggle room for negotiation. For
example, if your car’s market value is $8,500, you might want to price it a little
higher—maybe around $9,000. 
 
2. Gather all the necessary paperwork. Having the right documents and
paperwork in place will save you a lot of time and headaches. Here are the
most important documents you’ll need to make sure your sale goes smoothly:

Your car’s title

Bill of sale
 Notice of transfer and release of liability
Vehicle history report
Warranty documents
As-is documentation
 
3. Advertise your car. The more places you advertise, the more potential
buyers you’ll attract! There are plenty of free (or almost free) ways to let folks
know your car is on the market:

eBay Motors
Cars.com
Autotrader
Craiglist
Facebook Marketplace 

You could go old-school and put a “For Sale” sign in one of your car’s
windows or hang a flyer in your office breakroom.

Your listing should also include high-quality photos of your car (inside and out)
and an honest, detailed description of the car including the asking price,
current mileage and any recent repairs or upgrades you’ve made.

4. Prepare to meet buyers. You don’t want to waste your time on some

goober who hasn’t even thought about how they’re going to pay for a car! You
also need to protect yourself from fraud, theft or physical harm. When you’re
selling something worth thousands of dollars, you may be surprised by how
many nutcases pop up. 

So how do you pick out the ones who mean business and ignore the rest?

Get them on the phone. It’s one thing to trade messages over email, but you
get a better feel for a buyer’s motives and level of seriousness with a five-
minute conversation on the phone. 

Ask for their full name. If they aren’t willing to give you their full name, that’s
a huge red flag. Move along!

Agree on acceptable forms of payment. Ask them how they’re planning to

pay for the car. Cash is best and a verified check also works, but don’t
transfer your car’s title until the money clears into your account.
 Sell local. You really don’t need the hassle of arranging a long-distance sale
with someone who doesn’t even live in your state.

Pick a safe test-drive route. For your own safety, meet potential buyers
during the day at a safe public place—maybe a shopping mall parking lot. If
you can find a spot near a test-drive route with light traffic, that’s even better.

Agree on the car inspection. If a buyer really likes your car, they may also
want to have a mechanic inspect it. That’s a reasonable request! Once you
agree on a mechanic, pick a date and time to meet them for a full inspection
or diagnostic check. Tip: The buyer typically foots the bill for an inspection.
5.  Negotiate the price. After you’ve met with a car buyer and they’ve
seen your car, now it’s time to negotiate the price. You should go into any
negotiation with your lowest acceptable price in mind. Or if the asking price
you listed is “take it or leave it” with no room for haggling, you need to clearly
communicate that to your buyer.

If your buyer won’t make an offer that hits that number, be prepared to walk
away. Remember, there are plenty of people looking to buy a car. You don’t
need to be pressured into accepting a lowball offer.   
6. Close the deal. Once you’ve both agreed on a price, now you’re ready
to finalize the paperwork and exchange the keys for the cash. Hooray! Here’s
what you need to do to finalize the paperwork: 

Complete the bill of sale. You and the buyer will both sign and date the
document. Keep a copy for your records. 

Sign over the title. Once you and the buyer complete and sign the title
transfer, hand over the title to the new owner.

Fill out the release of liability form. Depending on the state where you live,
you might need to turn in this form to your local DMV. 

Hand over the keys. Accept the payment from the buyer and that’s it.
Congratulations! 

After You Sell the Car

There’s just one last thing you need to do after you sell your car: Remove the
car from your auto insurance policy. 
 If you’re buying another car to replace the one you just sold, this is actually a
great time to take a fresh look at your car insurance needs and shop around
for the best rates. 

Why You Don’t Want a Car Loan 

First, let’s cover the basics. A car loan is made up of three main parts:

1. Principal: This is the total amount of the loan (minus interest).

2. Interest: This is your lender’s favorite word. Interest is the amount of
money your bank or lender tacks onto your bill each month in exchange for
giving you their money.
3. Term: This is the amount of time you have to pay back the loan.
Today, the average new car loan is about $32,187 with a monthly payment of
$554 (which includes the principal and interest) over an average loan term of
69 months.5

That means you’d be stuck with monthly payments of $500 for almost six
years. That’s crazy! Not only that but, at the end of those six years, you’d end
up paying about $38,000 for a $32,000 car that’s now worth much less than
half of what you bought it for.

Did you know? Of Ramsey car owners surveyed, 43% acquired their
primary vehicle without any financing!

How to Get Out of a Car Loan

1. Pay off the loan. After all, you did sign your name on the dotted line.
It’s time to get gazelle intense and work harder than you’ve ever worked
before to pay off this sucker as fast as you can.
2. Sell the car. When it comes to your car’s value, time is not on your side
—especially if you bought it brand-new off the lot. And if you're upside down
on the loan (which means you owe more on the loan than what your car is
currently worth), you've got to pony up the difference.

If you don’t have the cash to pay off the loan and get the title from the lender,
you may have to get an unsecured loan, pay off the difference, and then
attack that loan with everything you’ve got.
Getting rid of your car loans once and for all is going to take a lot of work, but
you can do this! For more help on getting out of debt, check out Financial
Peace University. Our nine-week class has helped millions of people pay off
debt, save money, and build wealth!  
 What About a Car Lease? 

With a car lease, you’re basically renting the car—with the option to buy the
car at the end of the lease. And anyone with some basic math skills and a
calculator will tell you that leasing a car is the worst possible way to get a
car. It’s 100% stupid, 100% of the time.

Remember how we mentioned that new cars drop in value the moment you
drive them off the lot? Well, your car lease payment is designed to cover that
loss in value and provide the dealer with a profit through the interest you pay.
When they get the car back, you’ll have paid them more than the car has
depreciated during that time.

How do you get a deal in that? Spoiler alert: You don’t. If you have a car
“fleece,” you’ve been ripped off.  Dealer-ships are like casinos—the house
always wins.  

Kicking Car Payments to the Curb

Here are the steps to living payment-free:

1. Buy a cheap used car. Listen, you don’t need to drive a BMW or a
Jaguar—at least not right now. Get yourself a $2,000 car just to get around for
10 months. Remember, this is temporary. You won’t be driving this hooptie
forever!
2. Save what you would’ve spent on your car payment. For example,
take that $554 (the average car payment) and save it every month to pay for a
new car (with cash!) instead of giving it to the bank. After 10 months, you’ll
have $5,500 set aside to buy a new ride! Add that to the $1,500–2,000 you
can get for your old beater car, and you’ll have well over $6,000 saved up.
That’s a major car upgrade in just 10 months—without owing the bank a dime!
3. Sell the cheap used car and buy the car you want with cash. Take
our example above. If you keep saving for 10 more months, you’ll
have another$5,500 to put toward a car. You could probably sell your current
$6,000 vehicle for about the same price you paid for it 10 months ago. That’s
more than $11,000 you can use to pay for a new-to-you car in less than two
years since you began the process.
Another principle to keep in mind when building wealth? Don’t let the cost of
all your motorized vehicles (think cars, boats and lawnmowers) total more
than half of your annual income.
Let’s go back to that average monthly car payment of $554 one last time.
What would happen if you were able to save that car payment instead,
splitting it in half between saving for a future car and retirement savings?

If you did that, you’d have enough saved every four years to buy a reliable
$13,000 used car with cash. And, if you just invested the other half of that
payment into a Roth IRA with good growth stock mutual funds every month for
35 years, you could have more than $1.2 million in retirement savings.

Let that sink in: If you have an average car payment, half of it could be costing
you a chance of becoming a millionaire. We hope you like the car! A financial
advisor can help you take advantage of the money you save from not having
a car payment.  

We can’t say this enough. Millions of Americans are throwing away hundreds

of dollars every month to drive a car they can’t afford to impress people they
don’t even like—and then they wonder why they don’t have any money saved
up for their kids’ college funds or their retirement accounts. Don’t let that be
you!

Step 1: Set a Budget

The first step is to figure out how much money you’ll need to save up for the
car you want. A car is a big savings goal, and you can’t hit the target if you
don’t know what you’re aiming for. Browsing through listings of several
different makes and models of cars online will give you an idea of how much
you’ll need.

For example, if you see the kind of truck you want costs somewhere between
$9,000 and $11,000 after a certain number of years and miles, you might want
to set a savings goal of around $10,000.

If you don’t have the money to pay for it in full, it means you can’t afford it.
Don’t go into debt for things that go down in value!

Step 2: Set a Time Frame

You might not need to upgrade your car today or tomorrow. But you will need
to do it eventually. The sooner you start thinking about your next car
purchase, the better. If your car is starting to show signs of wear and tear and
you might need to buy another one in the next year or two, the time to start
piling up cash is now. 

If your goal is to save $10,000 in the next two years for a car, you would need
to save about $417 per month. That might sound like a lot. But think about it:
That’s still $130 cheaper than the average monthly car payment! And if you
give yourself three years to save up for a new car, you’d only need to save
$278 each month.

The more time you give yourself to save up for your next car, the less
panicked and pressured you’ll feel when you need to shop for one.

Step 3: Set Up a Savings Account

There’s no need to get fancy here. Opening up a separate high-yield savings

account or a money market account to park your savings for a new-to-you car
will get the job done. You can also set up automatic transfers from your
checking account to your new savings account each month. That way you
won’t forget or talk yourself out of saving! 

And once you buy your car, you can just use that account as a sinking fund for
car-related expenses like maintenance, repairs or even a future car purchase.

Step 4: Boost Your Income

Want to reach your car savings goal a little (or a lot) faster? Pick up a side
hustle like delivering pizzas or starting your own photography business. There
are plenty of ways to make an extra buck on the side , so get creative and start
hustling!

Step 5: Cut Down Expenses 

What if we told you that there could be some extra money to save for a car
hiding right there in your budget? That gym membership you haven’t used in
months. Those premium movie channels you never turn to. Eating out with
your coworkers every single day. The list goes on and on!