What could be easier than saving money? Just spend a little less to save a little more, right?
This sounds great, until we actually try to do it. That’s just about the time we get surprised with a forgotten bill, or a needy relative, or an odd clunking noise coming from the washer. So, trying to save for something as substantial as a car can really require some creativity…and discipline…and did I mention discipline?
It may be a challenge, but to help you keep your eyes on the Prius (or Ford or whatever), here are a few tips to help get your finances ready, your budget set, and you ready to go.
Set A Manageable Monthly Payment
Choosing a loan payment that you can afford is the basis for a successful car-buying adventure. Getting stuck in a smothering payment can not only be stressful, but if you start missing payments you may hurt your credit rating or even risk the vehicle being repossessed.
Typically, budget gurus suggest allocating 12%-18% of your monthly budget for transportation. As you calculate those costs, don’t forget to include all those pesky ongoing expenses, licensing fees, maintenance and especially insurance. Depending on the type of car you are buying, you could be looking at $200-$600 per month.
Learn more about How to Save on Monthly Car Costs.
Set Up Your Down Payment
Want to decrease that monthly payment quickly—simply increasing your down payment. For every dollar paid up front, multiple times that amount is saved in interest over the life of the loan.
Read more about How Interest Works!
Here’s an easy way to find out what you can afford, and how a different down payment will affect your payments. If you have a particular car in mind, head over to our auto loan calculator to help you do the math. Haven’t even gotten that far yet? No problem. ECCU also has a handy car research and buying site, which includes an inventory of vehicles as well as calculators and financing tools.
Set Your Schedule
You know what you want, and now you know how much it will cost. The next step is to develop a realistic plan of attack.
If you need your new car next week, this article is not going to be much help. But if you’ve got even a few months to start saving, there is a very good chance you could be waving goodbye in a nice, new ride. Looking at your monthly income, and with the loan tools mentioned above, start calculating how much you need to squirrel away per week compared with how long you can go without a fresh set of wheels.
If you can handle taking the bus another few months, or if your current car can do the trick for one more season without becoming a Fred Flintstone foot-powered fiasco, you are positioned to save yourself right into a new car.
Set Your Priorities
If a savings plan falls apart, this is usually where it happens. If you think you’re actually going to save enough money to buy a car, then you may be fooling yourself.
Really. That’s how some people do it. They fool themselves into making “fake” car payments, even before they buy a car, by depositing a projected car payment amount directly into a savings account. It’s actually a pretty good trick. A few months of this and you’ll either have a healthy down payment, or hit a realization that a car payment is not a financially feasible option.
Learn how to Save $1,000 in One Month
Set Yourself Up for Success
No matter how you choose to save, the most important part is to follow through. Steady, small steps will put you in the position to have financial choices, which means, financial freedom.