If you have time before your next vehicle purchase, it’s time to start saving, so you do not have to borrow as much. That gives you more options when at the dealership, and it might save you a lot of interest. While it takes some discipline, it’s not challenging to start setting aside funds for a nice car.
Reduce Unnecessary Spending
When saving for a larger purchase, it’s best to cut your spending in other places. You could reduce your spending wants to free up more funds for a vehicle. For example, you might decide to have stay-in date nights instead of going out to eat. Or you could cut down your grocery spending and redirect that money toward a car. If you have existing debt, like student loans, you might want to pay them off before taking on more debt for a vehicle. One way to reduce your monthly expenses is to refinance your existing student loans into a new lower payment. You could get a lower interest rate, or you might have more time to pay the loan off.
How Much Should You Save?
Pick the amount you are willing to spend and compare some cars in the price range to see if that is realistic. If you are getting a used car, pay attention to the model year and the number of miles on the vehicle. While those with higher mileages might cost less initially, you may end up paying more in repairs later. Once you know the price range, calculate the down payment, which will be about 10 to 20 percent of the purchase price. But the more you can put down initially, the better off you’ll be. Look for financing in the same way you do as a car. Shop around for the best deal since lenders might have different terms and pricing. Apply to online providers initially and see if your dealer will offer a better rate.
Start Budgeting for the Expenses
There are plenty of ways to budget, but one of the most common is the 50/30/20. That means half of your income goes toward your needs, 30 percent to wants, and 20 percent toward debt payment and savings. You can start with this and tweak each category to suit your lifestyle. You could factor in saving for a future vehicle in either the wants or needs category. Consider your goals. Do you want a used, basic car to get you to and from work, or would you rather have one that gives you upgraded features? The upgraded one would be a want, while a used one might be necessary if your old one dies.
Remember, if you need to take out a car loan, you’ll need to factor that into the budget, even if it is a small one. You’ll also need car insurance, and that might cost more than your existing policy. You might want to keep your car-related expenses below 20 percent of your income. Your credit score, driving record, and age might influence your premiums. Make sure you compare rates from multiple providers so you get the best possible rate.