Another reason to buy that car with cash

By Stew


Are not two sparrows sold for a cent? And yet not one of them will fall to the ground apart from your Father. But the very hairs of your head are all numbered. So do not fear; you are more valuable than many sparrows. Matthew 10:29-31

Several years ago, we made a dumb decision to take out a loan in order to purchase a car. It was a relatively sensible used minivan, nothing extravagant, but I have regretted the decision ever since. Fortunately, our car has held up well and we have had no more than the usual types of repairs. :twists fingers and rolls eyes heavenward:

Our loan is scheduled to be repaid in less than three years, I will be on pins and needles until that happens. A blown engine, a collision, a deer in the highway and we could be in a world of hurt. I am working on leaving this particular bit of worry with God.

I was speaking with a friend in church yesterday and “Tim” mentioned yet another possible event for me to add to my bucket of worry – remember that storm that we experienced back in July? Well, my friend, Tim’s car was outside during the hail and took on major damage. So much so that the insurance company totalled his car – even though it still ran perfectly. No windows were broken, not so much as a tail light – just dents from stem to stern.

His car was financed at around $7,100 and the Bluebook value was set at $6,500. Tim had full insurance coverage as required by law, including gap insurance (covers the gap between the amount financed and the actual value of the vehicle).

Here is what happened: the insurance money went directly pay off the loan and the insurance company towed his car away. There was nothing he could do – he offered to purchase the car back from his insurance company and he tried to talk them out of totaling the vehicle to no avail. They told him that they plan to tear the car apart and resell it for parts. Tim then offered to purchase all of the parts at once, before they towed it. They appreciated his sense of humor, but no dice. I understand the why’s and wherefore’s of this situation, but I was wondering if any of you have experienced this type of thing?

And the moral of the story? Do not purchase a car with credit! Swallow your pride and save up for a sensible, reliable vehicle that does not come with anything having to do with APR’s, monthly payments, gap insurance or “notes” and start saving up for that next vehicle. If something goes wrong, you will not be stuck with no transportation or worse – making payments for a car that no longer exists.

Photo by pheanix300

11 Responses (including trackbacks) to “Another reason to buy that car with cash”

  1. Korwin Says:

    During college, my car was seriously dented by hail and was considered totalled. It was just a well used Buick that had full insurance (not sure why my dad kept so much coverage on it) so I received a check from the insurance company and was able to buy it back for very little. I’m not sure if the age of the car affects the situation, but turned out to be a good deal from me as there was no loan against it.

  2. Christina Says:

    We owe about $2,000 on our main vehicle, and a month ago the engine blew on it. We only have one car right now (running great, but it’s old!) so my husband uses it to commute to work and I am stuck all day without a car. We were considering financing another car, even though we don’t want to be financing vehicles anymore….but your post helped me to reaffirm my stance. We’ll be saving up to get a new engine for our vehicle, however long that may take!

  3. Craig Says:

    Anytime you can save up and pay for a car in cash you will get a much better deal. It will be easier to haggle with the salesman to bring the price down.

  4. Zengirl Says:

    Similar thing happened to friend of ours, but they were happy, and bought another new car. Go figure. I am with you, buying with cash is best way, specially if you buy a few years old car, it is possible to save up money for it. Good luck with your car.

    btw, I am happy you finally sold your house. Congratulations! I gather, it must have been very tense situation from your post.


  5. SingleGuyMoney Says:

    The insurance company will do a cost comparison between repairing the vehicle or deeming the vehicle a total loss. Whichever one will cost them the least is the one they will choose. It doesn’t matter if the vehicle still runs or not.

    As far as your friend, if he had GAP coverage, his loan should have been paid in full.

  6. Mark Says:

    I am not sure what state they were in, but the vehicle owner is always the vehicle owner and has first rights to the vehicle in the case of a total loss. Insurance companies always try to make you believe that they have your best interest at heart, when really it’s their bottom line that they are concerned about.
    I own a repair shop and I see this happen quite often and we always try to make sure the customer understands their rights and also give them some advice on weather or not to retain the salvage. Sometimes it can be a great deal for them and other times a carrier will try and charge an unreasonable amount for the salvage. The titleing laws vary by state when it comes to owners retaining salvage.

    This to me would have been an ideal situation for the vehicle owner since they had gap insurance. Cars are an area where people waste so much money just because they want to impress their friends and people they don’t even know.

  7. Tommy R Says:

    Thanks Stew, not just for the column, but for the Bible verse reference of Matthew 10:29-31!

  8. Miss T Says:

    I’m making payments and I’m fine with it! I see it as a luxury that I can afford. Is that bad? No seriously, if I can afford my payment and there’s money left over at the end of the month, I’m tithing and saving for retirement and putting college money away for my kids – am I still wrong for having a car payment?

    My car was $17,900. Hardly an expensive car these days – it was a year old and I’m certain I saved at least $10,000 buying used. I have friends who owe more money on older cars and were upside down on their trade-ins and rolled that money into their new payments…(AACCKK!!!) I did not have that issue. We do have another car, my husband’s truck, that we paid cash for. I want to be a good steward of my money – I feel like I make frugal choices. I can totally afford my car payment – but I just can’t do the beater car thing! :)

    Is it ok to spend this money every month on my car when I don’t have any other big luxury items on my list – we don’t do expensive vacations, I don’t wear big diamonds, I use coupons! ha ha

    Just wondering – I really don’t feel bad about my car payment!!!

  9. Mind Miss Says:

    In terms of breathtaking luxurious automobiles, the Europeans retain the crown, thanks to such popular brands as Ferrari, Bentley, Aston Martin, and Lamborghini. Relish luxury, benefit from life.

  10. Amelia Stevenson Says:

    Anything and everything that involves rates or some ties with the banking system is not worth it. Stop supporting capitalistic pigs and start thinking about yourself. Please !