Here are all the tips you need so you can save money for a car!
For some people, a vehicle is a necessity because it’s their way of getting to places such as work, grocery stores, pharmacies, school, their family’s house, errands, and so many other places. However, since inflation is so big and prices for everything are getting higher and higher, it’s quite hard to purchase an automobile, even a secondhand one.
Believe it or not, prices are so hectic at the moment that some cars reach no less than $40,000. Of course, the price ranges depending on what you want. The more features you prefer your vehicle to have, the more expensive it will be. If you want to save money for a car, you came to the right place, because I have some easy but effective tips that might be helpful. Keep reading!
Save money for a car
1. Do you want to lease or buy
Before we begin talking about how to save money for a car, you have to decide whether you want to lease or purchase. Leasing an automobile means you only pay for the chance to drive the automobile for a specific period before you have to take it back to the dealership.
Buying it, on the other hand, is completely different, as you get to own it outright after you’ve made all the necessary payments to the lender. The choice depends on your needs and your long-term goals. Here are the pros and cons of both options:
- leasing a vehicle – you won’t pay as much money upfront, and the monthly payments are typically lower than automobile loan payments. The last pro is that lots of manufacturers will offer you a warranty of 3 years, or around 36,000 miles. On the other hand, you might notice huge charges if you drive over the set mileage limit per year or if you return the automobile with significant tear and wear.;
- buying an automobile – you won’t have any mileage restrictions for additional fees for tear and wear. While these are good things to make you want to save money for a car, you should know that you might have to pay huge down payments and monthly payments, and besides that, the long-term maintenance costs might be very high after your warranty runs out.
2. Calculate your down payment
One of the most important things you have to keep in mind if you want to save money for a car is that you have to calculate your down payment. You should do that before you head to the lot to make a purchase. We can’t be more specific about this down payment because it depends on the vehicle you want and your current financial situation.
The majority of lenders will ask for a big sum up front, and as you can imagine, the more you’re able to put down, the less you’ll pay during your monthly payments.
If you want to save money for a car, financial experts recommend you save between 10 and 20% on your vehicle’s down payment. While this might be a hard thing to do, especially if you’re on a tight budget, it is going to help you a lot in the long run because it will reduce the total interest you’ll have to pay on the loan.
The more expensive your car is, the more money you have to set aside for your down payment. For instance, if your plan is to invest in a new vehicle, you can try to put down closer to 20%. Experts say that newer automobiles require a bigger payment upfront, especially if you want to avoid being in a tough situation where depreciation is greater than your loan value.
However, if you save money for a car that’s been used for a few years, a 10% down payment might be just enough.
3. Think of how much you afford to pay each month
If you want to save money for a car, you need to know exactly how much you’re able to pay each month, so you have a better idea of what you need to do and change to achieve your goal. According to experts, the average monthly payments on new and used automobile loans in the third quarter of 2023 were $726 and $533. That’s like half a month’s rent, but a car is an investment for many people.
As I’ve already said, it’s very important to determine what monthly payment will work within your budget. Don’t forget to take into consideration all of your other regular expenses, such as rent, groceries, gas, and utilities, because you still need to live and maybe put some money aside too.
Since you need money for survival, experts suggest that your new car payment doesn’t go over 15% of your monthly take-home income, or 10% if the vehicle is pre-owned or leased.
4. Don’t forget about additional costs
There are many things to keep in mind when you start to save money for a car, whether you want to lease it, buy it brand new, or buy it second-hand. As we’ve already established, a vehicle is an investment, and it comes with several costs that you need to keep in mind.
The first thing you will have to pay is the insurance. While you can pay it monthly, every six months, or yearly, I recommend you choose the last option because it’s more budget-friendly.
Maintenance costs might not be the most affordable ones either, so you should buy a car with reasonable maintenance costs and set aside money in your budget for this purpose. Some manufacturers want to help future buyers with these maintenance costs, so they include some visits in the price you pay for your automobile.
If you save money for a car, don’t forget to put some money aside for gas too, because the prices are getting higher and higher. According to the U.S. Energy Information Administration, the national median price for a gallon of gas is $3.06 as of January 2024.
Experts believe that the national average gasoline price will be $3.38 in 2024. So, getting a car with good gas mileage can help you make fewer trips to the gas station, and that means you could save some money.
If you plan on getting an electric car, then you should estimate how much you’ll spend on charging. Experts say that using a Level 2 charger to fully charge your automobile at home can cost you around $3–$6 in electricity per charge. On the other hand, if you want to use a public fast charger for a full charge, the price is going to be a lot higher, at $15–$25 per charge. Don’t forget that a full charge can typically last you around 200 miles or more, so do the math here and make an estimation.
5. Consider trading
Besides the normal way to save money for a car, which is by setting up a savings plan, you could try and trade your old vehicle. While you might not bring down a huge chunk of the price for a new automobile, it’s still something, and the money you have left could go to something else, such as gas.
You can calculate the value of your old, trusted vehicle before you find out what the dealer says. This can help you negotiate a better deal and get a better price. According to experts, you can calculate that using appraisal tools like Edmunds and Kelley Blue Book.
However, keep in mind that in many cases, people discover that they make more money when they sell their old vehicles privately rather than trading them at the dealership. If you have the time and patience, I totally recommend you do that. If you need any tips on how to maintain and even increase your car’s resale value, here’s a fantastic article for you: 11 Incredible Tips to Maintain Your Car’s Resale Value
6. Set a savings plan
Now that you know everything you need to take into consideration, it’s time to actually save money for a new car. You might have a generic savings goal in mind, but don’t forget to attach a specific amount to it. You can calculate how much money you have to set aside each month for your investment using Bankrate’s auto-down payment calculator.
Once you know the specific amount, you need to decide how much you actually want to save and can save (take your living costs and your expenses into consideration) and come up with a place to store your savings (it can be a savings account, for example, or maybe a bank or credit union that’s separate from your checking account). If you want to make things even easier, you can schedule automatic transfers so that no matter what happens, you can still save money for a car.
What do you think about these tips on how to save money for a car? Let us know in the comments below! If you have any tips or recommendations for us, feel free to leave them here! Until next time, if you want to take care of your car and leave it shiny and sparkly, here’s something amazing for you!
