I’m proud to say that I have never fallen victim to an auto loan. While it may have taken a year or two longer to secure a new car, I ended up saving about 25 percent on it. It’s simple enough to budget your way to a car with some planning and a lot of persistence. About 7 years ago, I decided to buy a new hybrid vehicle. The base price of the car was around $26,000, which I talked down to $23,000 but we can get into that later. My annual salary at the time was around $70,000. I decided that I would need to put away 20 percent of my salary each year, and I could pay with cash for the car at the end of the second year.

This was not easy. I had to cut my lifestyle to the bare minimum and forget any big purchases for a while. Here were the rules I lived by:

  1. Mortgage, Food, and Gas budget were taken out first on each paycheck.
  2. The 20 percent for the car went into the bank second.
  3. The rest was saved for when I may need it later.
  4. I would eat out once a month, and see some form of entertainment once a month.
  5. I made all other meals at home, including my morning coffee.

It seems like a really easy way to save but you would be surprised how difficult it is to pass up fast food in the morning. It’s also a surprise to see how much you actually spend on it. A coffee and breakfast sandwich every morning ends up taking a couple hundred dollars from you by the end of the month.

I ended up meeting my goal in only a year and a half, and that’s a whole lot better than a 4 year loan. By the time I walked into the dealership with my checkbook, I had also been able to research everything about the car. The most important part was picking the best dealership. A quick search online will pop up the cars available at each dealership. It’s a lot better to walk in to buy the car knowing what you want and what to pay, than to blindly car shop.

In order to get a lower car price it’s important to “salesman shop.” A less experienced salesman will usually give the car up at a lower price because they’re paid by volume and not commission. The only tip I can give on this is: look for the salesman who is reluctant to walk over to you. Then after some small talk, offer cash for 5 percent below what you want to pay. With any luck you end up driving off the lot with a car you own flat-out. On top of it if you keep the same lifestyle, you can save up to anything you could want.