2 Rules You Need to Know When Buying a Car In Cash

This post did some zero-based budgeting on itself 🧮 Updated: November 12, 2025

Why You Can Buy a New Vehicle in Cash‍

Here is the thing: you can buy a car with cash. It won't happen by accident. It won't happen without effort, but it is a realistic and worthwhile goal.

If you’re a long-time YNABer, you already know how to do this, but for those of you who are thinking, “How in the world would I ever be able to buy a car with cash?”—this one’s for you!

Paying Cash: A Car Loan Is Not Inevitable

It may be all you’ve ever known. It may be all that was modeled to you. But you don’t have to have a car payment.

If you have monthly payments now, there are ways to get out of it. You could sell your car and downsize, or get crazy and be obsessive about paying it off aggressively.

Save With Intention and Get the Best Price

There are two primary strategies that can help you get into a place where you could buy a car with cash. You'll just need to be intentional about your car shopping plan to avoid paying monthly loan payments.

Get the Best Deal With a Used Car: New To You Doesn’t Have To Be New

New cars are tremendously expensive, and they are pretty much the worst investment ever. Car dealerships promise the best financing deals on auto loans to get you to buy, but it's not a good deal for you. The minute you drive off the lot, that car is plummeting in value. And that depreciation just keeps on rolling! The first three years are particularly bad.

So when you're buying a new car from a car dealer, it's like saying, “I want to buy this stock for $100, because I know that in two years it will be worth $60. Nothing like a great deal!”

Reliability isn't a compelling argument because there are plenty of used cars that are perfectly reliable and probably have cheaper car insurance. So, I just want you to think about this for a second: If you are buying a new car, why are you doing that? It is not for a financial reason.

Get Ahead Of Depreciation

If your car purchase is a used car—one that's three, four, five, six, seven years old—suddenly, depreciation is almost a non-issue. Almost. That is rule number one: Buy a used, new-to-you car, especially when you can do it with a cash payment.

Otherwise, you’re just pouring cash into an investment that promises to go bust. Remember buying a stock for $100 that you know will be worth $60 in three years—you wouldn’t do that. So,….

Pay Yourself First

The second rule is to pay yourself. You have to change the way you think about it. You need to start thinking about paying yourself a car payment every month instead of paying the bank. Do this before you make a vehicle purchase.

Essentially, it’s just saving. It’s just Rule Two. A “new” car is a True Expense, you put money away for it every month in your savings account. You know you will need a new car eventually. It just happens. It’s part of life. It’s a living expense. You know you will need a new car so you start paying yourself.

Julie and I set aside $360 per month for a new car all the time. When we bought our van—five or six years ago—we immediately turned around and continued setting aside $360 every month.

Our “New Car” category went all the way down to zero, and then the next month $360. If you set aside $360 every single month, you start to save some serious money.

Do The Math

It's not rocket science. You're buying an asset that does not go down rapidly in value, and you are able to save faster than that asset declines—way faster, way faster. All you're doing is building up a savings of cash for a new car, and you're not letting the actual car decline so rapidly in savings. When you combine those two together, you sell that car, you have the cash for it already, then you can actually upgrade and buy a little nicer car. (Maybe a slightly newer car, I still say you should be looking for deals.)

How to Save Money With Car Dealer Incentives While Avoiding Interest Rates

In the event you're buying from a dealer, you may miss out on dealer incentives, like cash rebates, for car shoppers if you make a cash purchase. If you have the money, it might be worth it to finance the car initially, but pay it off with your cash savings before you make a monthly payment. That's an easy way to pay cash and still get the dealer offers. Just make sure you have a plan in place if you go this route. You'll need to be very intentional to avoid debt here.

In Conclusion

You don’t have to have a car payment. You don’t have to buy a new car. Instead of making a payment to the bank every month, pay yourself—even if it is a small amount—and save up.

Not rocket science, but it sure can change the way you feel about your daily commute.

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