Are you in the market for a new (or even used) vehicle? If you are, then you may be wondering how to save for a car? The truth is there are an endless number of ways to begin saving for your next automobile purchase. You just need to find the option that is best for you and begin developing a savings plan.
Even with historically low interest rates, saving for a car is important for one’s personal finances. Instead of rushing out to buy a new car every two or three years, try planning out your next purchase and avoid paying tons of interest.
Tips on How to Save for a Car
If you are interested in buying a new vehicle, consider using some of the tips below on how to save for a car. Each of these tips includes real-life examples of how my wife and I are planning for our next car purchase.
1 – Make a Fake Car Payment
Have you have recently paid off an older car or don’t currently have any monthly payment? If so, you could begin making a fake car payment (to yourself) every month as a way to begin saving for your next automobile. Instead of sending your payments to your lender every month, make a payment to yourself. Try investing these funds into a high interest savings account to earn a little interest on the money you are saving.
After a couple months’ time, you can quickly save up several hundred to over a thousand dollars that can be used as a down payment. This practice not only teaches you how to save for a car but also gets you in the routine of making that monthly payment (assuming you finance your new vehicle). Selling your old car your self online to companies like We Buy Cars rather than trading it in is another great way to increase the down payment on a new one.
Personal Note – My wife and I have been making a $250 monthly car payment back to ourselves for over the past year. Once we paid off our last vehicle, we kept making these payments as a way to save up for our next car purchase.
2 – How Much Can You Afford?
Before you save a single penny towards a new vehicle, you must first figure out how much you can afford. Whether you pay cash for a used car or finance a brand new car, you should have an idea on what can fit into your budget. Too many people have bought or leased brand new vehicles in which they could not afford. Don’t let this happen to you.
It is also important to note that just because you can afford something doesn’t mean you should purchase it. Make sure you are comfortable with your purchase and don’t forget gas mileage. There is no doubt that price of gas will remain high, so make sure you can afford to fill up your vehicle when it costs $5 per gallon.
Personal Note – My wife and I would love to buy a new van with our next purchase to fit our growing family. However, with the high price tag that comes with a van, we will probably opt for something a little cheaper that still fits our needs.
3 – Start a Side Hustle
This may sound obvious, but starting a side hustle or finding extra income can play an important role in saving for a car. Finding extra funds can really help to accelerate the savings process and put you one step closer to that new vehicle. If your number one goal is to figure out how to save for a car, then consider adding a temporary side hustle.
Even an extra $100 per month can go a long way towards your new vehicle.
Personal Note – My wife and I were able to pay off our last vehicle two years early by using extra income we were making. We were able to pay down our principal by allocating the couple hundred dollars I was making on various freelance activities. Since the vehicle is paid off, we are now using these money to save for a new vehicle.
The three tips listed above are actual steps that my family is currently taking to save for a new car. As mentioned before, there is an endless number of actions you could take to begin saving for a car or any other large purchase (i.e. house). Hopefully these tips serve as motivation for you to plan out a large purchase like a car and then take action on your goal.