The car business is a tricky thing. In today’s society, having a car can be really important. Life is much simpler when you have a vehicle that can transport you around. And let’s face it, they can be pretty essential and expensive. Not a great pairing.
Do you know how to save for a car?
You most likely need a car to get to work, take the kids to school, to be able to go on trips, and so much more. Public transportation is never the most reliable, and then, you are constantly bound to timelines.
So it’s evident that cars are a pretty crucial possession for most people to own. The only issue – cars are by no means cheap to buy.
Even most second-hand cars will come at a fairly steep price, and if you opt for something new, you can expect those prices to skyrocket much higher. They’re something that you really need to save for.
Sure, you can get a loan, but that’s never the best option and can often land people in a lot of debt if they cannot keep up with the payments.
But how do you save up to be able to afford a car? You’ll find out in this article!
5 Best Ways On How To Save For A Car
1. Calculate Your Down Payment
The very first thing you’ll need to do is decide upon your budget. How much are you willing to spend? What are you hoping to spend versus what is the absolute maximum amount you can stretch to? These are all things you’ll need to know.
From there, you can begin to compare a range of different makes and models to ensure that you’ve set a realistic budget. Once you have decided how much you are willing to spend, you’ll want to calculate the amount of your down payment.
Typically, you want to put down around 10% of your budget for second-hand vehicles and around 20% if you opt for something new.
The best rule to stick to is the more money that you can put down at the beginning, the better deal you’ll get on your vehicle.
2. Consider Car-Related Expenses
The best way to budget is to live by the 50/30/20 rule. What’s that? It’s when 50% of your wages are allocated towards your monthly needs and expenses, such as rent and utilities.
The next 30% should go to your wants. These are things that you don’t need to live but will enhance your life in some way. The final 20% should go toward your savings or any outstanding debts.
You’ll need to decide whether a car fits into the need or want category. But the way that I would look at it is a fairly basic well-running car is a need. A fancy car with gadgets and gizmos galore is a want.
But you also need to consider that the payments for the car itself are not the only expenses that come with owning a car. You’ll need to pay insurance to be able to drive your car, and it also won’t get very far without fuel, so you’ll want to factor in these costs too.
Experts say that all combined car-related expenses should not exceed 20% of your monthly wage.
3. Limit Unnecessary Spending
When it comes to saving, the main thing that will help you bump up the amount you’re saving is sacrificing items that aren’t really necessary. Essentially, you need to start being more careful with your money.
When considering spending that extra $20 on take-out food, choose to eat at home instead and skip out on those morning iced coffees, cut down the amount that you’re spending on clothes.
Really, you need to shave down the costs of the ‘want’ category that we talked about above.
If you want to further your savings, you can always try cutting down some of your current expenses, such as grocery shops.
4. Set Up A Savings Account
Now that you have figured out exactly how much you want to spend, it is time to start saving.
Keeping the money that you want to reserve for your car is best kept separate from the rest of your wages. Setting up a savings account is a great way to deter yourself from dipping into your car money for other expenses.
5. Automate Your Savings
Now that you have a place to put your savings making regular and constant contributions each month is best.
There’s a super easy way you can do this. Just set up an automatic transfer that can make the deposits for you regularly each month. And before you know it, you’ll have the money you need, and that new car will be yours.
Final Thoughts
Saving up for a car involves you setting a clear and realistic goal and then being strict with yourself with sticking to it.
Opting for a fancier car that is out of your budget can be tempting, but this isn’t a great idea, especially once you factor in the additional expenses that come with owning a car. As necessary as a car is, it is not worth getting into serious debt over.
It’s also important not to dip into your savings. And it can be very tempting; you’ll need to show some real restraint.
If every time you want some fast food, a new pair of shoes, the latest gadget, or the like, you pinch a small amount of money from your savings, it will soon dwindle down to nothing.
You need to ensure that you do not take any money from your savings if you want to be able to afford your car as soon as possible.
However, if you do stick to the steps above, in no time at all, you will soon have the money that you need to own your new car.
Remember to be patient and show self-restraint. Saving for a car is definitely delayed gratification, but it will be so worth it once you are behind the wheel!
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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