4 Min Read
Buying a car can be an exciting experience. But with average new vehicle prices surpassing $40,000 and prices for used vehicles climbing over $25,000, it can also be a daunting time to make a big purchase. So, while some have the luxury of waking up, walking into a dealership with a bag of cash, and then strolling out with keys in hand, most of us need to plan our finances carefully.
Of course, there are several alternatives to driving, such as public buses and trains, biking, and even walking, but these aren’t always realistic or practical options. So, if you are in the market for your own vehicle and want to make your savings grow at the same time, read on for our top tips for how to save up for a car.
Why Should I Save Money for a Car?
Put simply, the larger the down payment you have, the easier it will be to manage your finances in the long run. It’ll mean that you’ll borrow less and thus have lower monthly payments to meet.
Reducing your monthly car outgoings will free up money for your other day-to-day commitments. Such things include your rent/mortgage, credit cards, health insurance, and even grocery bills. You could also find yourself in a situation where you can use your finances for other savings and investment plans.
Think of it from the opposite side of the spectrum. Without car savings, your monthly payments will be higher and potentially harder to maintain, especially in the event of an emergency. The last thing you want is to miss payments and run the risk of having your car repossessed.
How to Save Money for a Car
1. Work Out Your Budget and Downpayment
We’ve already established that the fanciest cars around don’t come cheap, although that doesn’t mean your car savings won’t stretch to something stylish and with plenty of mod-cons. There’s no perfect formula for how much you should put toward the downpayment, but you should aim for 15-20% for a new vehicle and 10% for a used one as a general rule.
Start by comparing a selection of makes and models and slowly narrow it down to an affordable price range. Don’t exceed your limits; if you’ve only got $250 per month to spend on a car, then don’t choose a car that will incur a $500 monthly payment. If you still aren’t sure, then work out your approximate budget using a car affordability calculator.
2. Plan for Day-to-Day Car-Related Costs
An important thing to remember when learning how to save up for a car is that paying for the actual vehicle isn’t the only expense. There are additional costs such as fuel, routine maintenance, auto insurance, and state registration. Dealerships might include the latter in the sales price, so make sure to ask when sealing the deal.
Adopting the 50/30/20 rule can help. It suggests dedicating 50% of your after-tax earnings to needs, 30% to wants, and 20% to savings. Then, you need to decide whether your car falls under your needs or wants category.
3. Cut Out Unnecessary Expenses
To see your car savings grow, you might need to reduce other monthly expenses. Among the first things to consider is cutting out are your wants. These are the things that you’d like to have but aren’t essential. It can be as simple as eating at home instead of going out and working out at home rather than paying for a gym membership.
With the Monorail app, you can redirect extra cash by using the automated calculator to determine exactly how much you need to be depositing into your car savings daily, weekly, or monthly.
4. Trade or Sell Your Current Car
If you already own a car, then trading it in or selling it will help fund a decent portion of the new vehicle. Trading it in at a dealership is a stress-free option; however, you might not get as much as you expect. On the other hand, with time on your hands and the right know-how, selling it privately will yield more, increase your spending power, and ultimately lower your future payments.
There are dozens of car appraisal tools available online that can give you an idea of how much your current vehicle will add to your car savings. And brushing up on your negotiation skills may help your end result.
5. Consider Getting a Side Gig
Whether you are wondering how to save money for a car or boost your savings portfolio, getting a side job is a great way to pull in additional cash. These days there are boundless opportunities for part-time and one-off paid jobs. From selling your unused clothes online and becoming a mystery shopper to housesitting and renting a room on Airbnb, the list really is inexhaustible.
As long as the new gig is legitimate and profitable, it’s definitely something to think about. Perhaps it turns out to be lucrative enough to place all of the earnings into your car savings.
6. Start a Dedicated Savings Account
Now that you have all of the tools to save up for a car, it’s time to put the money into an easily manageable account. The Monorail app offers you exactly this, an automated account that helps you plan for any money goal regardless of whether it’s big or small, tomorrow or in a few years.
Also, by using the Monorail savings feature, you can fund all of your goals, from buying a car to going on vacation and repaying your student loans, with one singular deposit — all you need to do is sit back and watch as your money is allocated according to your desires.
With careful planning and the right resources, saving money for a car doesn’t have to be as overwhelming as it might first seem. Then, once you’ve reached your target and purchased your car, there’s no reason why you shouldn’t start saving for your next goal already.
See how saving with Monorail can help you get a car.
Subscribe to our exclusive mailing list.
Subscribe to our exclusive mailing list for news and updates.