Saving to purchase a car is highly rewarding. It’s an awesome way to develop a healthy saving habit, and although saving takes discipline and patience, it’s worth it when you finally get to drive the car of your choice. The following are five tips to help you save money for a car. Check it out!
1. Decide Which Car Model You Want
How much you save depends on the car you want to buy. For instance, strong brands like Mercedes Benz attract higher prices. In 2019, the Mercedes Benz was valued at $23.36 billion. So, to save for a brand new Mercedes Benz, be prepared to save substantial amounts.
Of course, a brand-new car costs more than a used car. Also, a car bundled with the latest tech and numerous features costs more. It’s possible to determine the model by putting down a features wish list, then shop online for one that meets your criteria. If you choose to save for a used car, make sure it’s accident-free since 6.75 million car accidents occur every year in the U.S. alone.
2. Get A Savings Account
After establishing how much you need to save and how you will do it, shop for a great bank and open a savings account. Ideally, this should be a separate account dedicated to this purpose. It’s important to avoid the temptation to use your car savings for other things, no matter how urgent they may seem.
One way to leverage your savings is by investing them in a high-interest savings account or a certificate of deposit. Don’t touch your savings until you’re ready to buy yourself a new set of wheels or a used one. A fairly used car is a great alternative to a brand-new one if it saves money without compromising your specifications. However, make sure its service record is impeccable. The vehicle should have a record showing regular oil changes at intervals of between 5,000 and 7,000 miles.
3. Determine How Much You Can Afford
According to Experian, expect to pay between $400 and $650 per month for a used vehicle loan. This is a good guide when saving money for a car. In some months, you may be able to save even more, but the goal is to pay an amount that won’t leave you miserable. You need to consider the fact that there are other monthly expenses such as groceries, gasoline, house supplies, and other utilities. The savings shouldn’t be more than 15% of your monthly take-home salary, according to Edmunds, less if you plan to purchase a used car.
4. Get a Part-time Job
To earn extra cash and boost your car-savings account, consider getting a side job besides your full-time job. You can make extra cash in many ways, including working as a freelance content writer, sharing rides, and selling games or books you no longer need. The goal is to earn as much extra income as possible to boost your car savings kitty.
5. Budget and Cut Expenses
Saving for a car requires financial discipline. One of the things you must do is draft a budget and stick to it. Track your income and expenses and be frugal to avoid wastage. The goal is to cut expenses by ensuring you only spend what’s budgeted for. This will release extra funds you can deposit in your car savings account.
Adopt the 50/30/20 savings rule, which recommends spending half of your monthly income on essentials, 30% on non-essentials, and 20% on savings. To boost savings, trim the non-essential budget and redirect the extra funds into your car savings account.
It’s possible to save for a car, even on a shoestring budget. The key is to be frugal and only spend on necessities until you meet your goal. Set up a savings account and determine how much you can save monthly. Also, consider selling your unwanted stuff and channel the proceeds into your car savings account.