You’ve probably found that dream car you’ve always wanted to drive and you’re now so much more motivated to save for it. 😃 However, the thought of saving money to buy a car may seem like a daunting task. Is saving for a car really difficult? When you’ve laid out your plan and can be disciplined enough to stick with it, saving for a vehicle you’ve always wanted is actually do-able and achievable. We’ve gathered the key checkpoints on how to get you to the finish line so be sure to read to the end!
Know Which Cars are Affordable
As you know, buying a car is a major purchase so this isn’t a small amount of money we’re talking about. At this point, it would be a good idea to browse through different cars online so you’ll have an idea of how much they cost. The next step is to think about whether you can afford a brand new car or if a used vehicle fits your financial situation better.
For brand new vehicles, you might be able to buy one that is smaller and has a lower spec and fewer features. For that same amount, you just might also be able to buy a better car in a secondhand car dealership. Many used vehicles already have upgrades and modifications that fit your preferences. Those are just some of the major advantages of buying a used car so it’s worth considering!
Identify Car-related Expenses
The price of a car, whether new or used, is just one thing to think about. Once you’ve made the purchase, you’d have to spend money on taxes, insurance, fuel, congestion charges, breakdown covers, parking fees and other car-related expenses. It’s best to prepare your finances ahead so the cost of owning a car won’t eat up your savings.
You may want to prepare a spreadsheet for this so you’ll know how much you need to allocate on a weekly, monthly, and yearly basis. A lot of the information on fuel prices, insurance, and taxes is available online. A quick search will allow you to gain access to the amount you need to set aside for them. And even if you only get estimates, they will still help you to budget your finances.
Prepare Your Downpayment
The most affordable way to buy a car is to finance it. If you have enough cash to buy a car outright and still have money left for other expenses, then that’s something you can definitely do. However, for many of us, spreading the cost of a car through a car finance deal is more manageable. With a car finance agreement, you only have to prepare your downpayment and the monthly payments for a fixed term.
While there are zero deposit car finance deals, it’s recommended to have a downpayment to reduce the amount you have to borrow. The bigger your deposit, the lower the monthly repayment amount. But this also depends on the term you’ve selected. Shorter financing terms mean higher monthly payments but you’ll be able to pay off your loan sooner and that’s a good thing. Pick a car finance term that suits your financial situation best.
Purchase or Lease?
What if you’re not sure whether you want to own a car long term,but you know you do need a vehicle now? You actually have the option to lease a car, this is like renting it long-term. You still need to pay a downpayment and monthly payments but at the end of your contract, you return it to the lender. You may then opt to have another car lease contract and choose a car you like to drive for the next couple of years.
However, if you’ve decided that you want to own a car, then a Hire Purchase car finance deal is the best option for you. You would also pay a downpayment and then pay every month. When your contract ends, you may only have to pay a really small admin fee so that the car finance company can hand over the ownership of the car to you.
Leasing a car is more affordable but the car will never be yours, of course. With Hire Purchase, the cost is spread over three to seven years, depending on the agreed loan term. And when that’s done, the car is yours!
Commit to Your Savings Plan
When you’ve done the steps above, you now need to have an idea of the amount you have to save for a car purchase. That’s your goal. The next step you have to do is to know how much you can set aside every month from your income and promise yourself never to touch it. Try using the Carmoola car finance calculator to know the amount you have to pay monthly if you choose to finance a car.
When budgeting, it’s even better if you can itemise everything you spend each month so you can see where your money usually goes. Maybe you can cancel a few subscriptions here and there and put the money on your car savings. You may even try limiting the frequency of eating out. Cook at home more often. It’s cheaper and healthier!
Also, have a dedicated bank account for your car savings so you won’t be tempted to spend it. Try to automate your savings so that the money will be taken from your main account without you having to think or worse, forget about it. The more disciplined you are about your savings plan, the sooner you’ll reach your goal.
Knowing as much as you can about the car and the costs relating to it is important in budgeting your finances. Also, in saving for your car purchase, being disciplined with your money is key. You may have to make a few sacrifices like eating out or shopping but all this will pay off because you’ll be able to buy a car sooner. Once you’re driving your dream car and enjoying the open road, you’ll know that it had all been worth it! 👍 🚘