Even for the most frugal people, saving for a car can take years.
The average price of a new vehicle has climbed up to nearly $50,000, and a used car can easily cost in the $20-30,000 range. Not very many people have this kind of cash laying around, which is why saving for a car is such a big deal.
If you feel like you’re in over your head trying to buy your dream car, you’ve come to the right place. In this post, we’re going to tell you how to save for a car by giving you a few crucial tips that will change how you think about raising money.
Having to pay for a car can be daunting and, frankly, terrifying. Just keep reading, and we’ll make sure you’re doing it in an easy and effective way.
How to Save for a Car and Keep Your Finances on Track
Choose Your Car Wisely
Before you even start thinking about how to pay for a car, you should figure out what kind of vehicle to get. A lot of problems arise when people take out big loans for cars that they can’t actually afford.
Crunch the numbers by taking a look at your current savings, how much your current car might be worth, and your income. With this, you should be able to determine a rough price range that you’ll need to stay in. Look for the top-rated makes/models that fit within that realistic price range, and make plans to test drive your favorites before you buy.
Figuring Out Your Down Payment
Once you’ve got the perfect car in mind, it’s time to start thinking about how large of a down payment to shoot for. The more you come up with up-front, the less your monthly car payments will be.
Most experts recommend trying to put a 20% down payment on a new car and 10% on a used vehicle. Making a higher down payment doesn’t just lower your monthly payments, but it helps you qualify for better loans. If you’ve got poor credit, this is an undeniable benefit of taking the time to save first.
Being able to effectively save always comes down to smart budgeting. If you can figure out how to keep a strict monthly budget, you’ll find it much easier to put money away for your new car.
The gold standard budgeting method for boosting your savings is the 50/30/20 method. With this, you set aside 50% of your income for your needs, 30% for your wants, and the other 20% for paying off debts. Depending on how urgently you have to get your car, it could fall into the wants or needs category.
Try to remember to include all of your car-related expenses in your budget – gas, insurance, maintenance, etc. Your monthly car expenses shouldn’t exceed 20% of your overall income.
Trading In or Selling Your Old Vehicle
If you’ve got a vehicle that you can trade in, this is going to give a huge boost to your savings. Most car dealers will gladly take your old car and put it towards the cost of the new one, but you’re more likely to get better money by trying to sell it on your own.
Create an ad with lots of good pictures and a thorough description of the vehicle. Do a bit of research to find out what the same year, make, and model is going for on the market. If you find a buyer, you can put every cent of the money towards your new vehicle.
The only issue is that selling a car yourself is time-consuming. You’ll have to meet with potential buyers, field offers, negotiate, and deal with paperwork when you finally do sell.
Dedicated Savings Account
Open up a dedicated savings account where you put all of the funds for your new vehicle. Keeping your car fund separate from your other savings accounts and chequing account will stifle the temptation to make withdrawals from it.
Depending on the type of account, your car fund may also accumulate interest. If you don’t plan on buying your car for a few years, open up a high-interest savings account, and you’ll see significant growth.
You can also set up your savings account to take a bit of money every time you get paid. Come up with a number, and it’ll come out of your cheque without you having to lift a finger.
In learning how to afford a car, one of the most helpful things you can do is stop spending money. Cut out unnecessary expenses – restaurants, shopping, cocktails, etc. – and dedicate that money to your car fund instead.
Get a Side Job
If you want to streamline things, you can even get a second job to supplement your car savings. Putting all of the extra earnings straight towards the car will quickly get you close to your savings goal. Just a few shifts per week could earn you several hundred dollars per month that you wouldn’t otherwise have.
Find a Great Lender
We’ve discussed how to save for a car down payment, but if you need your new car ASAP, you may not have time to save. If this is the case, it’s best to find a respectable lender to give you a fair loan that can get you in your car and on the road right away.
At CarsFast, we can have you approved for a car loan within minutes. Our network of dealers across the country makes us the perfect choice for Canadian car financing, so visit our site today to get started with your application.
Learning How to Save for a Car
Figuring out how to save for a car can be overwhelming, but if you follow these helpful tips, you’ll get there faster than you might think. Each small contribution to your savings fund is going to get you closer to your goal, so start putting money away today.
If you need to supplement your car down payment with a car loan, don’t hesitate to contact us at CarsFast. We specialize in assisting people with all types of credit, and we’ve helped over 15,000 Canadian car buyers find their dream car.