My 2008 Financial Goal: Pay cash for a new car

Patrick at Cash Money Life is giving away a 4GB iPod Nano as an incentive to get readers to share their 2008 Financial Resolution.

I have several financial goals for 2008, but the one I want to share is my goal to pay cash for a new car. I've mentioned before that we are ready to trade in our 1997 Honda Accord, and that after weighing the pros and cons of a new car versus a used car, we've decided to go ahead with a new car that we'll drive for at least 10 years.

We haven't decided on a model yet, but we have set a budget of $25,000. This means we won't pay more than $25,000 for the car, and hopefully it'll be a few thousand less. (The budget for our 6-cylinder 2003 Nissan Altima was also $25,000, and we got it for a little under $23,000.)

We'll get several thousand for the trade-in. I know we could probably make more money by selling the car ourselves but we just don't want to deal with the hassle, especially because neither of us knows much about cars. With two young boys, minimizing the time and stress spent on things we don't enjoy is high on our list of priorities. Unfortunately, Edmunds.com lists the trade-in value at $3,150, while Kelley Blue Book lists the trade-in at $4,485 to $5,520. That's a pretty big difference, but to be conservative, I'll count on a $2,500 trade-in. If we get more, that'll be great.

That leaves us with $22,500 to save up. We've actually started saving already and are saving aggressively for this purchase. In fact, we've cut back on the amount we pay on my student loans in order to beef up our savings for the car.

I'm keeping an open mind, though. With the economy having a rough time, it's possible that we'll be able to get a fantastic financing deal when we buy the car next year. (Our Nissan Altima was financed through the dealer at 1.9% APR.) If that's the case, we'll opt to finance the car and put the cash toward my student loans instead.