Where do you keep cash for future car purchases?

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lessismore22
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Where do you keep cash for future car purchases?

Post by lessismore22 »

We pay cash for 2-3 y/o vehicles. Currently have 2011 Lexus RX350(90K miles) and 2014 Toyota Sienna(60Kmiles). Both should last us at least another 5 years.

I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
9liner
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Re: Where do you keep cash for future car purchases?

Post by 9liner »

We keep most of our moderate-term (2+ year horizon) money in our taxable brokerage account. The monies are split between VTMFX and VTSAX. Most on this forum will probably advocate for a high-yield savings account.
UpperNwGuy
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Re: Where do you keep cash for future car purchases?

Post by UpperNwGuy »

My auto fund is split between certificates of deposit and high yield savings.
runner3081
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Re: Where do you keep cash for future car purchases?

Post by runner3081 »

Will just pull from emergency fund, when the time comes. EFund is calculated to account for a 13k car and still be okay.
bubbadog
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Re: Where do you keep cash for future car purchases?

Post by bubbadog »

When I am anticipating a vehicle purchase in the near future, I just let that amount accumulate from my employment income in my checking account instead of putting it in my taxable account.
LivingTheDream
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Re: Where do you keep cash for future car purchases?

Post by LivingTheDream »

Savings (Ally)
Living The Dream
02nz
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Re: Where do you keep cash for future car purchases?

Post by 02nz »

"High-yield" savings, but I try to juice the yield with bank bonuses (e.g., Citi will give you $400 for $15K, only need to hold for 60 days).
Buckrodgerz
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Re: Where do you keep cash for future car purchases?

Post by Buckrodgerz »

VMSXX - Muni Money Market. Or a brokered FDIC short term C.D. if you can double the rate of VMSXX.
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luminous
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Re: Where do you keep cash for future car purchases?

Post by luminous »

We have ours in our brokerage account. Our car is 10 years old with only 60k miles so it will last for at least 5-10 more years, just like OP’s cars. If the stock market is down I can easily delay replacing the car, so I consider this a safe course of action.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.
Afty
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Re: Where do you keep cash for future car purchases?

Post by Afty »

runner3081 wrote: Sat Nov 28, 2020 8:32 pm Will just pull from emergency fund, when the time comes. EFund is calculated to account for a 13k car and still be okay.
Same here. Pay out of EF/cash reserves, then replenish it.
retiredflyboy
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Re: Where do you keep cash for future car purchases?

Post by retiredflyboy »

Ally Bank Savings Account
Facts are stubborn things. Everything works until it doesn’t.
checkyourmath
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Re: Where do you keep cash for future car purchases?

Post by checkyourmath »

I am waiting to get on that Cyber Truck list. I am thinking it is around 500,000 preorders so this topic is pretty relevant to me. Saving up 90k is a ton of cash especially with yields at historic lows. My car will be 25 years old so I think it will be time to upgrade. It is going to be like moving from a rotary phone to a iphone I can't wait.
Hyperchicken
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Re: Where do you keep cash for future car purchases?

Post by Hyperchicken »

If I knew I will absolutely need all that money in 5 years, then see all the conservative options suggested above.

However if I were more flexible, e.g. I knew that if needed I can postpone buying the next car, then I would invest in something like 50/50 or 60/40 stocks/bonds. Then if this portfolio does well, I am going to buy the next car with some money to spare, and if it does not, then I am going to wait few more years until I save more or until the market does better.
ivgrivchuck
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Re: Where do you keep cash for future car purchases?

Post by ivgrivchuck »

lessismore22 wrote: Sat Nov 28, 2020 8:01 pm I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
Savings account, 0.6%.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
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avenger
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Re: Where do you keep cash for future car purchases?

Post by avenger »

I have a 70/30 portfolio. I’ll just withdraw and maintain that allocation.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, VWITX, SV fund]
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galving
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Re: Where do you keep cash for future car purchases?

Post by galving »

lessismore22 wrote: Sat Nov 28, 2020 8:01 pm We pay cash for 2-3 y/o vehicles. Currently have 2011 Lexus RX350(90K miles) and 2014 Toyota Sienna(60Kmiles). Both should last us at least another 5 years.

I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
Vanguard Short Term Bond Fund - VBIRX
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midareff
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Re: Where do you keep cash for future car purchases?

Post by midareff »

I keep cash expected to be needed in the next year or two in the bank.
Goal33
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Re: Where do you keep cash for future car purchases?

Post by Goal33 »

I finance them and then pay them off with new incoming money over the next few months.

You don’t get a better deal if you pay cash from a dealer. That’s a myth. They get a kickback off the financing.

I’d rather pay 2% for 3 months than save up for a car that I don’t know when I’ll need to buy it. I also don’t want to pay taxes to sell stock.
Firemenot
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Re: Where do you keep cash for future car purchases?

Post by Firemenot »

I finance. My last two cars have been at sub-inflation interest rates. Why pay cash?
Mike Scott
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Re: Where do you keep cash for future car purchases?

Post by Mike Scott »

I keep cash in a savings account but would probably finance a new car if I were buying at the current rates.
Broken Man 1999
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Re: Where do you keep cash for future car purchases?

Post by Broken Man 1999 »

avenger wrote: Sun Nov 29, 2020 11:43 am I have a 70/30 portfolio. I’ll just withdraw and maintain that allocation.
Same here, except we are a 55% equities/45% bonds.

The only accounts that I maintain separately from our retirement portfolio are the 529 plans for the grandkids.

No accounts for this or that, no buckets, just a retirement portfolio that funds all our retirement expenses, including roofs, remodels, vehicles, whatever is needed.

Though, if I were offered a 0% interest rate today I would be all over it if I needed a new vehicle. Our current vehicle (2008 bought new in 2009) has less than 100,000 miles on it, it possibly will outlast me.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
Carguy85
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Re: Where do you keep cash for future car purchases?

Post by Carguy85 »

Goal33 wrote: Sun Nov 29, 2020 12:25 pm I finance them and then pay them off with new incoming money over the next few months.

You don’t get a better deal if you pay cash from a dealer. That’s a myth. They get a kickback off the financing.

I’d rather pay 2% for 3 months than save up for a car that I don’t know when I’ll need to buy it. I also don’t want to pay taxes to sell stock.
Firemenot wrote: Sun Nov 29, 2020 12:28 pm I finance. My last two cars have been at sub-inflation interest rates. Why pay cash?
Interesting... I’ve thought about these things for future higher dollar purchases. As much as I hate debt, it would streamline things a little. Although I have froze our credit with all the bureaus and probably have a fairly “bad” credit score now. O well.
Firemenot
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Re: Where do you keep cash for future car purchases?

Post by Firemenot »

Carguy85 wrote: Sun Nov 29, 2020 1:28 pm
Goal33 wrote: Sun Nov 29, 2020 12:25 pm I finance them and then pay them off with new incoming money over the next few months.

You don’t get a better deal if you pay cash from a dealer. That’s a myth. They get a kickback off the financing.

I’d rather pay 2% for 3 months than save up for a car that I don’t know when I’ll need to buy it. I also don’t want to pay taxes to sell stock.
Firemenot wrote: Sun Nov 29, 2020 12:28 pm I finance. My last two cars have been at sub-inflation interest rates. Why pay cash?
Interesting... I’ve thought about these things for future higher dollar purchases. As much as I hate debt, it would streamline things a little. Although I have froze our credit with all the bureaus and probably have a fairly “bad” credit score now. O well.
The wealthiest person I’ve ever known (well over 100 million) advised me to take out all the cheap debt I can to enable maximum amount on investments.
grettman
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Re: Where do you keep cash for future car purchases?

Post by grettman »

Just buy a Camry. Change oil at reg intervals and never buy another car again in your life :mrgreen:
yules
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Re: Where do you keep cash for future car purchases?

Post by yules »

lessismore22 wrote: Sat Nov 28, 2020 8:01 pm We pay cash for 2-3 y/o vehicles. Currently have 2011 Lexus RX350(90K miles) and 2014 Toyota Sienna(60Kmiles). Both should last us at least another 5 years.

I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
It depends on how much time you can save up for that specific purchase. For example, if it takes you 6 months to save up for that purchase 5 years from now, I might take on a little risk with bond funds since if I lose money, I can make it up real quick, within 6 months.

However, you must begin saving now to make that purchase in 2 years, then preservation of capital is key because a bad break will set you back. In this case, savings accounts only.

Yules
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Taylor Larimore
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Re: Where do you keep cash for future car purchases?

Post by Taylor Larimore »

lessismore22 wrote: Sat Nov 28, 2020 8:01 pm We pay cash for 2-3 y/o vehicles. Currently have 2011 Lexus RX350(90K miles) and 2014 Toyota Sienna(60Kmiles). Both should last us at least another 5 years.

I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
lesismore22:

I no longer own a car. However, when I did, I simply withdrew the cash from my bank or portfolio.

Keep investing simple.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense."
"Simplicity is the master key to financial success." -- Jack Bogle
mpsz
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Re: Where do you keep cash for future car purchases?

Post by mpsz »

My current car was purchased brand new and financed for 60 months at 0% with $0 down. I'm planning to keep it for 6-8 years. I'll do the same with the next one. Honda seems to consistently have 0.9%, Toyota has 0% now...

If I was looking to pay cash, I would invest the cash in my taxable account and then withdraw only when I actually needed it. If you're not driving the car completely into the ground and keeping up with maintenance, you have some flexibility on when you actually need to make the purchase. If the market crashes, sell bonds and/or wait for it to recover, harvest tax losses, borrow from the EF with a plan to build it back up, take Uber for a while, or take out a car loan temporarily - depends on the exact market scenario. My point is that there's some flexibility and this is a lot of cash to hold on to just in case.

These are somewhat aggressive strategies, if you're not comfortable with these then I would recommend HYSA, I Bonds, CDs, or similar.
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Re: Where do you keep cash for future car purchases?

Post by abuss368 »

lessismore22 wrote: Sat Nov 28, 2020 8:01 pm We pay cash for 2-3 y/o vehicles. Currently have 2011 Lexus RX350(90K miles) and 2014 Toyota Sienna(60Kmiles). Both should last us at least another 5 years.

I'm curious where fellow BHs keep their cash for future car purchases with interests rates paying so little these days?
I don’t keep any. We have historically purchased new vehicles and held them for 10 - 12 years. The interest rates have been 0.00% or very close to it.

Now with cars continuing to increase in price, I am considering leasing going forward.
John C. Bogle: “Simplicity is the master key to financial success."
regularguy455
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Re: Where do you keep cash for future car purchases?

Post by regularguy455 »

Why pay cash when you can finance most new vehicles for 0%?
hudson
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Re: Where do you keep cash for future car purchases?

Post by hudson »

regularguy455 wrote: Sun Nov 29, 2020 2:44 pm Why pay cash when you can finance most new vehicles for 0%?
I want the title now.
I don't want to make any payments.
I don't want any debt.
I have no problem with anyone who goes with 0% financing. I borrowed at a higher rate for all my vehicles from 1969-2007; then I drew a line in the sand.... no more!
Anything that works is good technique!

For the OP:
When I need a new car, I'll just sell something in my taxable account and put it in a savings account until time to make a deal.
I probably won't go for a new vehicle until 2028.
Last edited by hudson on Mon Nov 30, 2020 10:44 am, edited 2 times in total.
Topic Author
lessismore22
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Re: Where do you keep cash for future car purchases?

Post by lessismore22 »

Thanks everyone for the responses. As always, Bogleheads never disappoint.

I think with our timeline being a minimum of 5 years out we will keep adding to our taxable and just pull from there when needed. I do understand the comments regarding 0% interest rates...we are just so debt-averse I'm not sure I could stomach having a car payment.

:sharebeer
SR II
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Re: Where do you keep cash for future car purchases?

Post by SR II »

In July, low mileage (70K) 15 year old car unexpectedly "died" (even second opinion at dealer didn't know which of two expensive problems it was). Bought a replacement certified used one-year-old station car with 0% interest for 60 mo.
3funder
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Re: Where do you keep cash for future car purchases?

Post by 3funder »

50% cash, 50% VTIAX
Global stocks, US bonds, and time.
Colorado13
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Re: Where do you keep cash for future car purchases?

Post by Colorado13 »

Ally bank CDs and savings account.
Money_Badger
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Re: Where do you keep cash for future car purchases?

Post by Money_Badger »

Firemenot wrote: Sun Nov 29, 2020 12:28 pm I finance. My last two cars have been at sub-inflation interest rates. Why pay cash?
Agree with this. My car is paid for now, but the interest rate was 0.9%.
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