Buying a car is a big investment, considering that new cars cost over $49,000, while used ones average around $29,000. Very few people simply walk into the dealerships and spend such an amount of money walking out with the car. Most of us need good planning and budgeting before buying a car. In this guide, we will provide you with some tips that will give you an idea of how to save for a car.
Decide Your Budget
As mentioned above, buying a car is a big investment, so setting up a budget is the first important thing. To decide on the budget, you will need to consider different things, such as the car you want to buy, whether it will be a new one or a used one, how much money you have now, and how much you will need to save.
Deciding the car: Deciding the car is the major factor that will help you understand the amount you will need to save. This will also help you to calculate your down payment.
New car vs. Used car: Avoid buying a new car, as you can find a great deal for a used car if you spend some time on research. New cars are expensive and take a big toll on your budget. Make sure you have a good idea of what your ‘needs’ are and what ‘wants’ are.
Review Different Financing Options
By examining different financing options, you can get an idea of how much money you will need to buy a car. If you save enough, you may end up buying a car with cash. If not, there are a few financing options you can think of.
With a cash or no-financing option, you will need to save more. With this option, you will not have to worry about your monthly payments.
If you decide to go with the finance option, financing with the bank is another good option. This is the best option in terms of financing. Getting pre-approved loans is a good way to get started, and this gives you an idea of how much you can spend on buying a car.
Financing in other ways, such as private lenders, should be the last option. If you don’t have a good credit score, then you can think of this option. This usually has less hustle than other financing options but also comes with more interest rates. So, make sure you keep an eye on that.
Limit Unnecessary Spendings
You will need to sacrifice some of your money-spending habits and control unnecessary spending. Establish a monthly budget and follow it strictly. Cut down your subscriptions and unnecessary memberships, and avoid spending too much on restaurants.
Starting a side hustle is a great way to achieve your savings goal early. There are many ways to earn money online, and you can spend one or two hours a day besides your daily hustle to increase your income.
Another good option is to set up a new savings account. Creating a separate account helps you track your savings and is a great way to avoid any rush buying. Whatever you are committed to saving will go directly into this account, and you can withdraw it once your goal is reached.
Sell or Trade Your Current Car
If you already own a car, you can sell it or trade it to put the money into your next car. Selling the car on your own may take some time, but it will always earn you extra. You can spend time on research and try your luck selling on your own. There are many online tools available that can give you an estimate of the worth of your car. If not, trading with the dealerships can also make you money, which you can use as your down payment.
Conclusion
Saving for a car requires planning and discipline. By following the above-mentioned ways, you can save enough to buy a car without breaking the bank. Remember, a car is going to be a significant purchase, which also comes with ongoing costs that you will need to take care of. With this said, with small efforts initially, you can start the habit of saving money and land yourself a new car.