Saving for a new car can be daunting, especially when you first start out on your journey, but it doesn’t have to be. The key to successfully saving without sacrificing is all in the planning! Here are our tips on how to save for a new car without breaking the bank.
Before you can even think about beginning the savings process, it is vital that you know exactly how much money you are going to need. If you’ve already set your sights on a particular make and model, it's time to shop around and see if you can find a dealership with a price that fits your budget, and then you need to figure out how much you can feasibly put down as a down payment. You should aim to make a 20% downpayment on a new vehicle, and 10% on a used vehicle. The higher down payment you can pull out, the better chance you have of qualifying for a loan with a lower interest rate and better monthly payments. In the same way that you hunt for your ideal car, you want to shop around for your financing too. There are all different financing structures out there, so browse everything from dealerships to online lenders to find the right one for you.
Remember that once you buy the car, the expenses don’t end there. You still have insurance, upkeep and, of course, gas to factor in. Having some money in your savings fund for that initial insurance payment is a good idea so that you don't end up feeling incredibly out of pocket. Keep in mind that these expenses will become a recurring part of car ownership, so consider factoring them into your long-term budget. If you find your insurance premium is too high, you can always shop around and see if you can find a more affordable offer.
Alternatively you can factor in the expense of installing some safety or anti-theft features in your car. While these may seem like an additional cost at first, they could help you make considerable savings when it comes to insurance.
Sure, you may want to treat yourself to a new closet, or go and enjoy a nice dinner at the end of a busy working week, but you should remember your saving goals. As you save up for a major purchase, it's important not to let any money slip away that could help you achieve your target faster. Maybe cut down on purchases that are “wants” as opposed to “needs” during the savings journey, and instead put that money towards your long term goal.
It might sound obvious, but many people don’t realise the importance of having a savings account. Of course there is always the option to keep your savings in your regular account, and just tell yourself you won’t dip into a certain amount, but it’s much easier to slip up that way. Opening a seperate account makes a safe haven for your savings, and will reduce the temptation to spend a little here and there. If you anticipate saving over the course of a few years, putting your money into a high-interest savings account can see your finances grow with minimal effort.
Once you’ve decided where you are going to keep your savings, it's a good idea to set up automated monthly payments each time pay day rolls around. These days most banks offer automatic transfers from your checking account, and this can usually be done online from the comfort of your own home. Automated deposits takes the saving out of your hands, so that you can make your way towards that shiny, new car without even realising it!
These days there is an app for everything, and if you're someone who struggles with budgeting, why not try out one of the many budgeting apps out there? Some of the main players this year include Mint, one of the oldest and most well-known apps on the market, Goodbudget, which uses all the basics of saving with actual cash and then places them on an easy-to-use digital interface, and You need a budget-the perfect app for putting money to one side and take control of your money.