Having a car of your own marks the path of independence. Although it is a large and necessary purchase, the decision cannot be made unless you are first adequately informed.
Understanding how to save money for a car is not complicated, but it requires a lot of commitment and discipline to do it correctly. Here are some valuable tips to make owning a car a much more achievable goal.
1. Analyze your budget
The first step to saving for the purchase of your next vehicle is to review your current budget. You should know your income and expenses well in order to determine how much money you can save monthly.
If your income is not fixed but variable, do not be too optimistic with the numbers. Your income must be stable. That is, you must be able to maintain a consistent income.
The equation is simple: if you subtract your total monthly fixed expenses from your total income, you will know how much you can save each month and how long it will take you to buy the new car.
2. Accurately determine your expenses
It may be hard, but if you want to know how to save money for a car, the first step is to start keeping a complete record of all your expenses. Especially the variable expenses. Many people are surprised to discover the amount of money that drains into small extra expenses at the end of the month.
The best way to control your expenses is by using an expenses tracker app that allows you to keep a complete record of every penny you spend. The more we know about where our money is going, the better we can control our spending.
3. Define what expenses you can reduce or eliminate
Once you have a clearer idea of where you spend your money, you can start making some adjustments. Some expenses are not essential, so you can eliminate or reduce them. Of course, this doesn’t have to completely change your lifestyle.
For example, you could suspend your subscription to online movie services, exercise outdoors instead of paying a gym membership, temporarily switch to other brands, take advantage of discounts, rewards, and membership points, pay for fuel in cash, switch to a cheaper internet plan, etc.
Focus primarily on avoiding small expenses (they add up to a significant amount) and stop using your credit card to make unnecessary purchases. Remember that many small savings will add up to significant savings at the end of the month.
4. Put your savings in another account
If you only have a bank account, saving money might be much more difficult for you. Separating your savings account from your checking account helps you know how to save money for a car because you can see how much money you have saved at all times.
Fixed-term deposits can also be an ideal option since they allow you to save while safely obtaining benefits. In addition, they have no maintenance costs, and there are terms adapted to each need. Ask your bank about the different options and interest rates they can offer you.
5. Automate your savings
Each month, you must separate your savings from your spending money. Without a doubt, if you leave them mixed together, you will be more tempted to spend it throughout the month.
It is advisable to automatically separate the pre-established savings for your car at the beginning of the month, right when you receive our salary. This technique works best if it is automated. The best way to achieve this is through automatic transfers to your savings account.
6. Find a second job or a new source of income
If what you get from your full-time job is only enough to pay your bills for the month or save very little, you might consider taking a side job to save more money for your car.
A new source of income could help you a lot! It will allow you to save more for your car’s down payment, borrow less money from the bank, and reduce your monthly payments. Don’t just consider traditional second jobs, though.
There are many ways to earn extra money in your free time, working the days you want and the number of hours you want.
7. Sell your used vehicle
If you want to renew your used vehicle, keep in mind that you will always get a higher price if you sell it yourself instead of giving it to the dealer as part of the payment. However, this will require more time and work on your part.
If you are not in a hurry to make the purchase and are willing to dedicate yourself to selling your car on your own, you will double your profits.
On the one hand, you’ll get more money for your old used car, and on the other hand, you’ll have more time to save while trying to sell it.
If you decide to give your vehicle to the dealer as part of the payment of your new purchase, do not mention it until after you have agreed on the price of the car you are buying.
Be sure to inform yourself through internet advertisements or specialized magazines what the market value of your vehicle is to avoid being given much less money than it is really worth.
8. Calculate how much you can pay in installments
If you cannot pay for the car in cash, always try to finance as little as possible. The idea is that the loan fee you request should not exceed 15% of your income.
Another great advantage of saving monthly for the purchase of your vehicle is that you will be able to understand with more certainty how much money you can set aside monthly for your vehicle.
If you’re buying your first vehicle, you also need to consider all the extra expenses your new vehicle will generate: tax, gasoline, maintenance, parking, etc. However, you can also consider subtracting those expenses that will disappear thanks to your new car, such as public transportation expenses.
Knowing the money you could save for the initial payment and the fee you can pay per month, you will know the approximate value your new car could cost without damaging your finances.
Try to apply for financing not only at your bank, but also at a couple of other places in order to get the best interest rate for your financing.
9. Look for the best options at that price
Once you’re ready to buy your vehicle and know what you can spend, visit as many dealerships as you can and look online for deals.
In buying used vehicles, always buy in the places where they offer you the best guarantee. Take advantage of the opportunities of used cars with low kilometers that are almost new. And in case of new vehicles, take advantage of year-end offers.
Having your own car is certainly possible if you follow these tips that we have just given you. But, of course, you must be consistent, see the opportunity to save, make the most of it, and enjoy your new vehicle!