Now that you've decided you want a new or used car, it's time to save the money to buy that car. If you're buying a new car, you're probably saving up for the down payment. It's a good idea to put a 20 percent down payment on a new car or even a used car if you plan to make monthly payments on it. Here are some tips to help you get behind the wheel a little more quickly.
Set a Car Buying Budget
If you don't currently own a car, then buying a car comes with some expenses you might not consider. For instance, you must pay for:
- car insurance
- monthly payments
- and more
You need to factor all of these expenses into purchasing a new car. For example, if you can afford $400 towards all car expenses, then your payment can't be $400. Car insurance is a flexible expense. If you buy a used car and don't owe any money, then you can purchase basic car insurance. However, with a new car, you must carry full coverage to pay off the car if you're in an accident. Also, if you don't currently have car insurance, then you'll pay more for the first six months.
Check and Repair Your Credit Score
Your credit score plays a large part in how much you're going to pay each month for a car payment. The better your credit score is directly linked to lower your interest rate.
For example, if you need to borrow $10,000 and pay it back over five years, at a five percent interest rate, the monthly payment is $188.71 and at two percent interest rate, the monthly payment is $175.28. While $13 doesn't seem like a lot of money, then multiple times 60 months. You can do a lot with an extra $780.
You can do small changes to make a big difference in your credit score. Consider paying down a credit card and dispute anything that's wrong on your credit report.
Skip Some Treats
There is always somewhere in your current budget where you can save money. Do you stop at Starbucks each morning on the way to work? Are you eating out a lot during the week? You want to skip some of your treats but don't give up them all. You want to save money but not be so strict that you give up on the idea of a car. Like your credit score, small changes can make a big difference.
Go over your current budget and identify areas where you can save some money. Once you choose items and treats to forgo, make a plan for times when you will treat yourself before you get your car. You can make it saving milestones and a reward for a job well-done.
Automate Saving Money
To make it easier to save up for a car, automate your savings. When you direct deposit your paycheck, you can set it up with your bank that a set amount automatically moves to your savings account. If you don't have a bank account, then now is the time to open one. Consider using a credit union if you can find one that you qualify to join. Credit unions offer fewer and lower fees, and sometimes, even higher interest for savings accounts than traditional banks.
Pick up a Side Gig
In the modern world, delivering pizza or Chinese food isn't the only way to pick up a few extra bucks. You can use your skillset to make a little extra money. From websites that pay people to write to Uber and Lyft that help you make money by driving, there are many ways to make a little extra cash.
If you're looking to buy a car, there are many ways to get the money together more quickly. From automating savings to improving your credit score, these options don't need to be all about depriving yourself to save money.