According to Statista, upwards of 14 million vehicles are sold in the US every year. However, due to the recent pandemic, and rising prices, cars are much less affordable today. You need a plan to afford the car you need.
Here are 10 tips to save up for a car.
1. Set a Realistic Goal for an Affordable Car
You shouldn’t set your goals to buy a Tesla Roadster or a Mercedes Benz right off the bat. A car is a tool, first and foremost, and it shouldn’t be seen as a luxury primarily. You should buy a car that gets you from point A to point B and has the essentials like navigation.
Besides that, your car should also be highly rated by consumers for mileage, and for durability. Remember, this is a purchase that you may keep on average for 3-5 years; perhaps longer.
So, do your research and pick out a good, affordable car for yourself and then begin saving.
2. Figure Out if You Can Lease or Purchase
For some, leasing a car is better than purchasing it. If you’re looking for a car to take you to work each day, perhaps leasing it would be cheaper. If you’re looking for a long-term purchase you can drive anywhere you like, a purchase should be more sensible.
Leasing just means you’re paying to drive the car. Buying means you’ll own the entire car without any sharing. Leasing is often cheaper at monthly rates than financing a car. However, there are mileage restrictions for leasing.
Financing also requires more money upfront. However, it’s also more practical if you’re making a purchase for good.
3. Do Some Much-Required Calculations for a Down Payment
You should sit down and calculate how much you’re going to have to pay for a car. This could be monthly payments, or a lump sum. You should figure out how much you’ll need to save each month to reach a savings goal, specifically for a down payment.
You should also figure out whether your job is stable enough for long term financing a car. If you’re switching jobs, you should probably wait to see what the situation is like after the switch.
4. Remember Additional Costs
Remember that the car isn’t the only thing you’re purchasing. There’s insurance, which is a monthly, biannual, or annual premium. Find out what’s the mandated insurance your state requires you to carry and choose limits and coverages.
Also factor in vehicle maintenance costs and tracking costs, etc. These costs can really eat into your salary and savings if you’re not careful. You should keep all of this in mind when you’re learning how to save for a car.
5. Create a Savings Plan
You should create a monthly savings plan regardless of whether you’re buying a car or not. It’s a good rule of thumb to follow. It can save you on a rainy day.
A best practice is to deposit part of your paycheck every single month into a high yield savings account. This will grow your savings over a large period and exponentially grow your money. This should be an account which is separate from your retirement account. It’s something that will finance your more extravagant purchases. It could be for more than a car; perhaps a house.
6. Shop Around for Deals
Don’t be satisfied with a general figure for car prices. Shop around different car dealerships and find the best deals, even for the same car. This will allow you to get the best price regardless of the car. This works for everything from insurance to housing, to even groceries.
Margins and profits are different depending on the dealership. You shouldn’t surrender to their price gouging if you can find a better deal.
7. Automate Savings Deposits
You should automate a deposit to your savings account whenever you get a paycheck. This is a great practice which will grow your savings exponentially and set it on autopilot. It will also prevent you from overspending from forgetting to save.
You may be greeted by a pleasant surprise when you check your savings one day. It’s truly amazing how they can grow over a long period.
8. Reduce Unnecessary Spending
It’s not a good idea to spend on luxuries or unnecessary expenses when you’re saving. This includes expensive restaurants, entertainment, electronics, or even unnecessary subscriptions. Today, we are surrounded by ads all the time which try to goad us into impulse purchases.
However, you have to maintain your will to not overspend on frivolous things. While you’re at it, you should cancel any expenses which serve no purpose. This could include gym memberships, cable subscription, streaming services, club memberships, etc.
9. Trade-In or Sell Your Current Car
You can trade in or sell your current car to get a better deal on your latest purchase. This may not always sweeten the deal, but the extra money that you get will certainly put a dent in your expenses.
If you’re selling to the same dealership that you bought your car from before, you may get a better deal. They may even knock off the price a little because you’re an older customer.
10. Earn Some Extra Money If You Can
The last, but definitely not the least of the tips to save up for a car is a side hustle. This is definitely not a point of pride or an ideal situation, but it can help to save up for a car. Extra money going into your savings account, no matter how little it is, is a boon.
This could be for part time work, freelancing, or even raising money through selling old clothes/electronics.
Just keep in mind that a car is a material thing that can be bought just like everything material in this world. You can save up for a car successfully if you follow these 10 tips.
