Did you know that every year over 74 million new vehicles are sold worldwide? When you need a new car, high prices can seem almost impossible to reach. But do you know how to save quickly and efficiently for a down payment?
Even with a small income, saving can be easier than you think. Read on as we discuss how to save up for a car.
Work Out a Down Payment
If you are buying a car outright, you can skip this section. However, for most people, a car will be purchased on finance. By calculating the down payment, you can work out what type of car you are saving for and how much you need.
Start with an overall target amount. See what brand and model you can get in that price range. From here, you can work out the down payment aiming for 20% on a new vehicle and 10% on a used car.
The more you can save over this total, the better your deal will be. It means you will be paying off less, getting a better rate, and it will also make you more likely to qualify.
Don’t just go with the finance car dealer offers you. They will be on commission, and their deal may not have the most favorable rates. Compare and contrast offers from a few lenders before committing.
List Needs Against Wants
Now you know the type of car and the down payment you are saving for, you can refine the car buying process further. Start by making a list of features you need against the list you actually want. This will help you prioritize your spending.
For example, do you really need upgraded trims with heated seating? Is it as essential as multiple safety features to protect your family? All of these can impact the price, and doing away with some of them can bring the vehicle cost down a lot.
Trade In or Sell
If you already have a vehicle, you may be able to trade it in for money off your new one. Speak with a few car dealerships and see what they would take off. From this, you can get a rough value of the car’s worth and deduct it from your projected expenditure.
You may get more money from selling it outright. Look for second-hand sales of the same model, age, and condition. If you can put the car for sale a few weeks before, you may be able to raise more capital for the final deposit.
Budget for Expenses
It is not just the car itself that will cost money. The car buying process also involves setting aside money for the many auto-related expenses you will encounter. These can severely limit your down payment amount if they are not considered wisely.
Costs such as tax and insurance will add to the essential payment section of your monthly budget. Just like finance, you should shop around for car insurance to get the best deal. It could also be impacted by the type of vehicle you choose to buy, with newer, more powerful models commanding higher insurance prices.
One way to bring this amount down is to speak with providers about combining insurances. You may have home insurance, pet insurance, and life insurance as well. By getting them all from the same provider with your car insurance, costs can be reduced.
Limit Your Spending
Now you know how much you are saving for and what you want, it is time to do the hard part. This involves saving by limiting your spending.
Work out your monthly budget. Put on essentials such as rent, bills, and the grocery spend. What is left over is your disposable cash. From this, put aside at least half toward the car deposit.
Get a Savings Account
Now you have that money put aside, you need a saving up for a car account. If you put the money in as soon as you get paid, then there is less chance of spending it.
The type of savings account depends on your long-term goals. If you are thinking way in advance, then drop it into a high-interest savings account. Make sure to shop around for this, as some banks can have much better rates of interest than others.
If the bank offers you an account with easy access to the money, don’t take it. When you have to physically go into a branch to transfer money or make long phone calls, you are less likely to use it for other purposes.
Consider automating your savings. Set up a direct debit from your main account to ensure that your designated amount goes into savings every pay day. This way, you will never have to worry about accidentally spending money set aside for your car.
Earn Extra Money
The process of saving can be sped up by increasing your income. This is relative to the time you have. Little spare time means you can devote less time to earning more, and vice versa.
A great way to do this is with a side job. Start an online business or pick up shifts from a company that needs a few hours filling. If you have any skills, try to use them by selling goods online or teaching what you know.
Finally, make sure the extra money you earn goes straight into the savings account. It can be easy to spend it on bills and unforeseen extras, but this makes your additional effort fruitless.
How to Save Up for a Car
Now you know how to save up for a car, set your plan in motion. Know what you want and how much you can afford. Then instigate your saving plan and set a designated time to achieve your goal.
If you enjoyed this article, we have many more to help. From saving to investment, we can help get the most from your money in the coming year!