6 Simple Ways To Save Money For A New Car

Purchasing a car may be a thrilling endeavor. However, making such a large purchase can be intimidating and calls for a well-thought-out savings plan. Saving money can minimize the need for borrowing. This strengthens your negotiating position and may result in interest savings of thousands of dollars. Even if you're taking out a loan to cover a significant portion of the sticker price, you'll still need to pay a down payment and other out-of-pocket costs before you can drive your car home. 

To help you get started, check the following six simple methods that can help you save money for a new car fast. 

Work Out Your Budget and Downpayment

To determine how much money you have available to save each month, it's critical to analyze your finances. First, subtract the amount required for rent or mortgage, food transportation, insurance, utilities, health care, and other living expenses from your gross income. Next, subtract payments for credit card balances, school loans, and other debts.  

If you're purchasing a new car, aim for a down payment of 20% to reduce your chances of being upside down on a loan in a year or two. The typical down payment for a used car is around 10%. With this in mind, start comparing a range of makes and models, then gradually reduce the selection to an accessible price range. Don’t stretch your limits; if you can only afford $250 per month for a car, don’t go for the one requiring a $500 monthly payment.  

woman buying a new car

Trade or Sell Your Current Car

If you already have a car, you can finance a sizable chunk of the purchase of the new one by trading it in or selling it. Luckily for you, there are many junk car buyers that will help you sell your junk car in Phoenix, Dallas, Boston, or anywhere across the States for cash, which is why you should consider this stress-free option. 

Alternatively, if you have the time and the necessary skills, you may sell it privately for more money, which will boost your purchasing power and ultimately result in cheaper payments. Numerous car appraisal tools are accessible online, and they may help you estimate how much your current automobile will increase your auto savings.  

Cut Out Unnecessary Expenses

If you follow any type of savings challenge such as the 6 months savings challenge, you know that you are able to save up a sizeable amount in a fairly short period. But to stay on track, you must make some important decisions. For instance, to make this happen, are you going to reduce certain expenses or add a new source of income? List all of your spending and revenue sources to assist you in making a decision and see where you can make changes.

Start with the things that are nice to have but aren’t necessary. For instance, it can be as easy as exercising instead of paying for a gym membership, and you could try eating at home rather than going out every night. Similarly, it might be beneficial to cease using your credit card to make purchases you don't need. Instead, limit your credit card purchases to things like gas and food for a few months.

Set Up a Savings Account

After learning how much to save and how to save it, the next step is to find a secure place for your money. Opening a separate, dedicated savings account can be worthwhile if you want to avoid being tempted to use your auto funds for other things. In addition, this can make keeping tabs on your progress simpler because you can always check your account balance to see where you stand. 

Prepare for Additional Expenses

Consider additional car costs, including insurance, title and registration fees, delivery costs, and sales tax. If you're buying a used car, you'll also want to pay for an inspection before you close the deal. Once you start driving your new vehicle, you'll incur gas, parking, and maintenance costs. 

While you don't necessarily need to save up for every ongoing expense ahead of time, estimate how much they'll be so you can tweak your savings goal if required. For example, you should save enough to pay for the first gas tank and a parking pass. Then, consider incorporating these costs into your vehicle savings goal so that you're prepared to cover them when the time comes.

Consider Getting a Side Gig

Getting a side job is a fantastic way to add extra money to your new car budget. Additional money can go a long way, allowing you to put more money toward a car, take out fewer loans, and lower your monthly payment. Luckily, there are several opportunities for part-time and occasional paid work nowadays. The list is endless and includes everything from mystery shopping to housesitting to renting out a space on Airbnb. 

Final Thoughts

Saving for a new car is a smart financial move if you have the time and money to do so. The rule is simple: save as much as you can now to borrow less in the future. Although starting to save for a new car can seem a little intimidating at first, you do have options. Break down your objective into manageable steps and you’re halfway there!