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How to Save Money for a Car: The Ultimate Guide

23 April 2020 No Comment

Approximately 90.3 million vehicles were sold worldwide last year. If you plan on selling your old car and buying a new one, it helps to have a plan in place first. Otherwise, you could end up spending more than intended.

By learning how to save money for a car beforehand, you can buy a car without breaking the bank. Otherwise, a talented salesperson might end up taking you for a rideā€”and blowing your budget.

Here are the best ways to save for a car. With these tips, you can buy your new ride and drive off without buyer’s remorse.

Keep reading to discover the smart steps you need to take when saving up for a car!

1. Determine Your Down Payment

When learning how to save money for a car, you first need to know how much you can spend. Start by choosing an estimated target amount. Then, compare a few different makes and models to determine if that estimated amount is realistic.

Once you determine a price range of what you can afford, you’ll want to calculate your downpayment. The goal is to put 20% down on a new vehicle or 10% down on a used one.

The more money you can put into your down payment, the better deal you’re bound to make! The best way to save money for a car is to put down a higher down payment. That way, you can qualify for a loan and earn a lower interest rate.

As a result, you can schedule more affordable monthly payments for the future.

Try to shop for financing the same way you would shop for a car. The pricing and terms will vary between different lenders. You can apply for an online provider before determining if the dealer can offer you a lower rate.

In addition to the cost of the car itself, you’ll also want to determine if you can save for sales tax and fees, too.

2. Budget for Expenses

Try to arrange a 50/30/20 budget for yourself, which saves:

  • 50% of your monthly income to needs
  • 30% of your monthly income to wants
  • 20% of your monthly income to savings and debt repayment

As you start saving for a car, you’ll want to determine if your vehicle is a need or want. A used car will get you to work the same way a brand-new one will. However, if you want a car with upgraded features, that’s more of a want than a need.

Don’t forget to factor your car payment and ongoing costs (including insurance) into your budget. Try to avoid allowing your car-related expenses to exceed 20% of your take-home pay.

There are a few factors that can impact your insurance premiums, such as your:

  • Driving record
  • Age
  • Credit score

As you budget for your expenses, look for quotes from different insurers. You can also bundle your auto policy with other policies when saving money for a car.

3. Limit Your Spending

When saving for a car, make sure to limit all unnecessary spending. Take a look at your wants versus needs. Which wants can you cut back on as you’re saving for a car?

Try to reduce your needs, too, including your cable bill and weekly groceries. Then, redirect the money you’re saving to your car’s down payment.

4. Create a Savings Account

Now that you know how to save money for a car, you’ll want to keep your money safe. Consider opening a separate savings account. That way, you can avoid the temptation of dipping into your car savings for other needs.

Are you saving for a car over the course of a few years? If so, consider putting your money in a high-interest savings account. You can also use a certificate of deposit to help your money grow.

Once you find a place to store your car fund, consider automating your savings. You’ll want to make regular contributions to your fund to help it grow. Automatic transfers from your checking account can help you automatically save.

5. Sell or Trade-In

Car sales reached between 16.7 and 17.1 million vehicles in a single year. If you’re selling your old car before buying a new one, make sure you’re getting what you deserve. While selling it yourself will help you get more money, it’s also a timely process.

Consider using appraisal tools to get an accurate estimate of your car’s value. Once you know how much you’ll get for your old car, you can get a better understanding of how much you need to save.

Was your old car totaled? If so, check in with your insurance company. See if they can issue a reimbursement check that you can use to cover your new car.

Consider visiting junk car buyers to get as much money as possible for your old ride.

6. Start Hustling

If there’s still not enough money in your new car fund, consider picking up a side hustle to help you save. A side job can accelerate your progress and bring you one step closer to your new car!

7. Do Your Research

Take the time to thoroughly research the cars you’re interested in. Once you start narrowing down your options, take the time to test drive a few cars. You might discover your dream car lacks the qualities you’re hoping to find.

As you test drive each car, take a few mental notes. Which qualities are on your must-have versus want-to-have list?

How was the test drive? Did you notice any issues or missing factors? If so, keep narrowing down your dream car.

Make sure to avoid buying add-ons while you’re at the dealership. For example, you don’t need extended warranties or tire protection plans if you’re trying to save money.

Taking the time to thoroughly research ahead of time will help you avoid buyer’s remorse later on. After all, you don’t want to save for a new car only to hate what you end up with.

Roll Up to Your New Ride: How to Save Money for a Car

Now that you know how to save money for a new car, start tucking that money away! As you build your little nest egg, you’ll feel relieved that you can afford a larger down payment and save money in the long run!

Looking for more car guides? Check out the Autos section of the blog today!

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