A new car is the ultimate symbol of freedom and independence for many people. But buying one is sometimes easier said than done, especially when on a tight budget. Read on to get some pointers that could help make this more achievable.
Ten Steps to Save Money When Buying a Car
If saving for a car is on your list of goals in the near future, then it’s important to start planning and figuring out how you can work this expense into your budget. Buying a new car without going through the proper planning could leave you regretting your purchase and being stuck with a monthly payment that is more than your budget can handle.
Identify What You Need
The first step in figuring out how to save money is to figure out what kind of car you want to buy. Take time to figure out what your must-haves are for a car and then find cars that match up with these features. If you’re not able to find a car that has everything on your must-have list, then prioritize and decide how much the top features are worth.
Figure Out How Much It Costs
Once you’ve decided on a car or a couple of options that you’re excited about, it’s time to determine how much they actually cost. While you may be tempted just to look at the MSRP listed on the car manufacturer’s website, this is far from an accurate way to figure how much the car will really cost you. The MSRP or Manufacturer Suggested Retail Price can be thousands of dollars different from what you will ultimately pay. If a car is in high demand and supply is short, you may have to pay more than the sticker price. On the other hand, you might be able to get a car that is not as popular for a significant amount less than list price.
According to Kelley Blue Book, the average cost of a new car in 2018 was more than $41,000. However, this does not mean that’s how much you have to pay for a new car. This price refers to the average figure paid for all cars sold that year, which includes higher-priced luxury cars.
Work It Into Your Budget
If you have an idea of what it will cost you to get a new car, then you can begin to work it into your monthly budget. This will help you to determine how much money you need to start saving in order to be able to afford it. If your budget only allows you to save a small amount each month, then it might take you longer to save up for your new car. Need help creating a budget? Check out this article: How to Budget: Creating a Plan to Save More & Spend Less.
Create a Timeline
Once you have a clear idea of how much money you need, how long it will take to save the funds, and how often you’ll add cash to your savings account, create a timeline. This plan is where many people will want to start when figuring out how they can save for a car, and it can serve as a roadmap for getting your car. It also can serve as motivation to keep on pace with your plan.
Automate Your Savings
Once you set your goal for how much you need to save each month, you can set up an automated transfer that will move the money into your savings account. By automatically transferring money into your savings each month, you’re helping prevent the possibility of accidentally spending that money on something else. This form of forced savings may help you stay motivated as well.
Reduce Your Debt
If you’re struggling to find any excess funds that you can put toward saving for a car, it might be worth taking a look at your current debts and work to get them paid off. This way, you can reduce how much money you are spending on interest and fees each month. Paying off debt will give you more income that you can then save up for a car. Does this sound like your situation? Start here: 4 Tips for Formulating the Right Debt Plan.
Increase Your Income
In addition to decreasing your debt, it is also helpful to find ways to increase your income. From asking for a raise at work to finding a side hustle, increasing how much money you are bringing in each month is an excellent way to start saving for a car.
Taking a long hard look at your budget can also be helpful in saving money for a car. It might be worth cutting back on how much you are spending on things like restaurant meals, entertainment, and clothing, so that you can put extra cash toward your goal of owning a car.
Sell Things You Don’t Need
If you have a lot of things in your house that you don’t need, selling them could be a good way to raise money for buying a car. Craigslist and yard sales are options or, if you have the time and space, an online auction site like eBay is another option. Getting rid of these unused items can not only help you bring in additional cash, but it can also help clear up much-needed space in your house.
Shop for New Insurance
When planning what you need to spend on a new car, it’s important that you don’t forget about how much you’ll spend on insurance. The best way to save money with car insurance is by shopping around for the lowest price possible. It may be tempting to just go with the first quote you get, but comparison shopping could save you hundreds of dollars a year.
Buying vs. Leasing
A common question when buying a car is whether to buy or lease. There are pros and cons for each option, so it’s best that you do your research before deciding which option is best for you.
Buying a Car
Buying a car is the more traditional option. You put down a deposit and then pay off the rest of your loan in regular installments until you own it completely. The main advantage to this is that you will own the car when your loan is paid off, and you are not subject to any mileage restrictions that come with a lease. One disadvantage of buying is that you will be paying interest on your loan.
Leasing a Car
Leasing a car allows you to get a car that you could not afford to buy outright. With a lease, you will pay for the amount of time that you use the vehicle and any mileage beyond what is allowed in your contract. The main advantage of this method is that it can cost less upfront to drive away with a brand-new car and also that you can exchange cars every few years without having to sell your old car.
New vs. Used
Another common decision to make is how to purchase the car—new or used? The main consideration when deciding how you want to buy your car is how much money that you have available for a down payment and how large of an initial expenditure can be sustained each month.
Buying a New Car
Buying a new car can be expensive upfront, but many times you can get a better deal with how much money is available for the initial down payment. You can also have the peace of mind that comes with being the first owner of a car.
Buying a Used Car
While some people may hesitate to buy a used car because that means someone else has driven it previously, in most cases, you can still get a great deal with a used car. And while the term “used” may hold a negative connotation for some, in many cases these cars will feel like new as they are thoroughly cleaned and detailed before being sold.
How Can CreditAssociates Help?
If you’re trying to find ways to increase your shopping power when buying a car, a great way to get started is by reducing any cumbersome debt. At CreditAssociates, we could help you become debt-free in as little as 24 months. We can also negotiate with creditors on your behalf to reduce what you’re required to pay back. Reducing your debt could allow you to allocate more of your income to saving for and buying a car.
Common Questions About Buying a Car
How much should I put down on a car?
According to Kelley Blue Book, you should plan on a down payment of at least 10% and up to 20%. The ultimate amount will depend on your negotiations with the dealership and whether you are planning on buying outright or leasing the car.
What should I do with my old car?
If you’re looking to buy a new car and have an old car to get rid of, two popular options are to trade it in to the dealership or to sell it yourself. Trading your car in means the dealership will assess how much your car is worth and apply that value as a credit toward your new car.
Should I ever pay cash for a car?
Paying cash for a car might be an option if you have the money readily available. However, this might not get you any better deal on the car as dealerships are incentivized to sell cars using loan programs as this serves as an additional revenue stream.