Purchasing a car is a big financial commitment that usually requires months of preparation, saving, and budgeting. Saving money for a car now can ensure that you have it when the appropriate one comes around.


When you use budgeting applications, manage your finances, and make wise investments and purchases, you’ll be better equipped to handle unforeseen costs, such as when you need to buy a new automobile.


How to Create Your Budget


You need to decide what kind of automobile you want and whether you want to finance or lease it before you can set a budget. Just a quick reminder: although leasing could seem less expensive up front, you don’t own the vehicle, and there might be extra fees if you drive over the allotted distance.


Understanding that you’re not only saving for upfront expenses like the down payment or purchase price is part of knowing how much money to save for a car. You should also budget for supplemental costs such as auto insurance, gas, and routine auto maintenance.


You might have to purchase a less expensive car even if you can afford the down payment if you can’t afford gasoline every month or a broken tail light.


Being realistic is key when estimating how much you’ll need to save and how long it will take to achieve that amount. Not every month’s income may go toward auto payments if you’re also paying for other bills like food, health insurance, rent, or daycare.


Calculating Your Outlay


Examine all of your expenses, whether large or small, when figuring out your total monthly costs. Large-ticket things like rent and health insurance are a given but don’t forget to factor in less evident costs like parking meters, babysitters, and takeout meals. Bills like cable, utilities, and gym memberships would also be included on that list, along with any credit card or student loan balances you may be repaid.


Once your monthly expenses are calculated, take that amount out of your monthly take-home pay after taxes. The remaining sum must be used, but it’s important to realize that this isn’t your monthly auto budget. Keep in mind that you’ll also need to use that sum to cover your personal expenses, auto maintenance, gas, and insurance.


Should an illness or injury prevent you from working, you might need to depend on your savings to pay for some costs during your absence. In addition, there can be extra unforeseen costs for things like birthday celebrations, date evenings, house maintenance, and new clothes or shoes. Because you won’t have enough money for other essentials, you shouldn’t have your entire take-home pay locked up in a car payment.


Compute Monthly Costs And The Down Payment


For a used car, the standard down payment is 10%, while for a new car, it is 20%. You should put down at least $1,200 if the used car you’re eyeing costs $12,000. Be prepared to pay at least $5,000 upfront for a $25,000 new car.


After your down payment, any remaining balance will be divided into monthly installments. Since these monthly payments fluctuate according to sales tax, interest rates, and the trade-in value of your previous automobile, an auto loan calculator can assist you in estimating them.


Although purchasing a car with terrible credit is feasible, you should be aware that obtaining a favorable loan arrangement may be more difficult if your credit score is low. Higher-credit-score borrowers typically get better loan arrangements, like lower interest rates or smaller down payments.


Even with poor credit, it is still possible to get a car; you will simply need to save more money upfront or increase your monthly payment budget. If so, it’s also critical to evaluate your financing choices and come up with a savings plan.


Easy Ways To Get Auto Insurance Savings


Let’s talk about ways to save money for a car now that you know how much you should save before purchasing one. We will concentrate on strategies for saving money for a car with a low income because it might be difficult to save when you have a limited budget.


Take on more shifts at work. You can make even more money by accepting jobs that pay more, such as weekend or night shifts.


Locate a side business: While classic side gigs like babysitting, housework, and tutoring are still a possibility, you may also use apps like TaskRabbit or Fiverr to locate side jobs like graphic design, website development, furniture assembly, and simple home repairs.


Purchase items that are on sale: You can save a lot of money by shopping at the grocery store and department stores’ clearance racks and by not cutting coupons.


Eat at home: If you’re serious about saving money, it’s better to stay away from expensive establishments like restaurants and coffee shops.


Get rid of pointless memberships. Do you have a gym subscription that you never use? How about several streaming services or cable television? Eliminating these subscriptions could result in annual savings of hundreds or even thousands.


Use public transit: If you usually go around using Uber or Lyft, consider switching to the local buses and trains.


Fund a savings account: Establish a specific savings account to hold cash for your vehicle because it can be easy to squander money, regardless of how much is stashed away in a shoebox or in a checking account.


Finding a car and paying off debt faster can be achieved by understanding how to save money for a car and how much it costs to maintain one.


Why not check out our car payment calculator and use it to help you plan your next car purchase if you enjoyed reading this post?

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