A Step-By-Step-Guide to Saving For A Car
In a world where things will constantly catch you off guard or by surprise – purchasing a car isn’t one of those expenses that we can simply or easily incorporate into our existing budget. To alleviate any unnecessary stress and to ensure your mind is clear to make such an important decision, we want to make sure you’re given some reasonable steps to save for an impactful purchase. Use a combination of these tips to save for your new set of wheels and everything the new car encompasses.
Set a comfortable budget
Many people begin to think about the car they want versus the amount of money they’re willing to actually spend. This isn’t necessarily a bad thing, but there are plenty of instances where the car we desire might not fit into our budget like we hoped. Evaluate your current expenses to responsibly narrow your focus upfront. Begin a thorough search for the car(s) that interest you – this way you can gauge the total amount of the car.
Alternatively, you can evaluate your current budget and consider how much of your total income (percentage or dollar amount) that you’d like to put toward a car payment each month. Beginning in this way can help level-set your mind (and pockets) before getting carried away. If you are set on a type of car, but know the cost is a bit more than what your budget allows, your efforts can be focused on increasing your down payment amount to alleviate a stretch on your monthly budget.
Determine a down payment amount
There are many online calculators and resources that can assist with helping you determine what number works best. It’s encouraged you put down at least 10% on a used vehicle and 20% on a brand-new car. While this isn’t set in stone keep in mind the more money you have upfront can qualify you for a lower interest rate – making your monthly payments more palatable.
Create a savings plan and stick with it
While this isn’t everyone’s favorite part of the car buying process, it’s the most crucial! Dedicate and commit to saving an additional amount for this car purchase. You have the option of opening a new savings account completely dedicated to your car – that way you have a very clear picture of how much you’ve accumulated over time without any other distractions. Creating an automated system to help save can not only boost your confidence but can guarantee you’re not losing traction as it relates to saving. If you want to hit your savings goal faster, using a side hustle to generate extra money can assist in this process. Within the Mint app, you have the freedom to create a savings goal completely dedicated to your new ride.
From the app:
- Open the app and select This month from the bottom menu.
- Scroll down to Your goals.
- Select Create goal in the instance this is your first Mint goal. If you already have at least one goal, select see all, then Create a new goal.
- Choose the goal that’s best for you, enter how much money you want to set aside monthly, and answer any other questions.
- Select Create goal. You can begin to track your progress!
It’s truly that simple. While there’s nothing wrong with using any system or method you have to normally budget, Mint has created a way for you to see and track your progress in real time.
Budget for all potential expenses
Often overlooked, new cars absolutely guarantee a new set of expenses. Car insurance increases due to the coverage that’s required for a newly purchased vehicle. This can also be used as an opportunity to shop around for the best car insurance rates. Don’t forget to account for increased maintenance fees or service packages that are offered during the car buying process.
Trade in your current car if possible
While the value of your current car won’t be able to cover the cost of the new and shiny one – shop around and see who is offering the best trade-in value for your vehicle. Selling the car or the valuable parts is also an option for older models. Negotiation is the name of the game – make what you have work for you!
Tighten up your discretionary spending
Another key point none of us really care for – limit the unnecessary swiping! Take a look at your previous bank statements and identify a few ways that you can cut down your spending. This may mean going grocery shopping a bit more or eating in so those funds can be directed toward your new purchase. If you have to pass up on a few brunches or shopping trips to alleviate the jitters relating to purchasing a new car – it’s totally worth it. You’ll be surprised about how much money you can actually save in a relatively short amount of time by being more conscious about where your money is being spent.
Stay strong and remain patient
Living in a very instantaneous world, we often lack the patience to see things completely through. How many of us started saving and the discipline quickly faded? Or you begin very excited and allow your emotions to get in the way? We may have all been guilty, but luckily, we don’t have to live or be defined by our last financial mistake. Committing to saving of any capacity is a daily commitment, accompanied by daily sacrifices. Try your best to fight the urge of rushing this process haphazardly. When we’re hasty in our decisions, we tend to spend more than we’d like which can have negative, long-term impacts.
Revisit your savings goal and make sure it’s visible often. Do you have the freedom to go and purchase a car today? Absolutely. Will there be good and bad consequences? Without a doubt. To avoid buyer’s remorse, use this time as preparation to save ahead of time so you can truly enjoy your new purchase with absolutely no regret.
Steve Hansen, Vice President, Underwriting, Architects & Engineers/Contractors Professional Liability, Tokio Marine HCC – Cyber & Professional Lines Group,…