When you're ready to upgrade your vehicle and purchase a new car, it's important to consider your budget. When you're saving for the down payment or plan to pay for the car in full, you'll need to save enough money to afford the right make and model. As you plan ahead for your new purchase, there are a few tips for saving money.
How Much Should You Save Up For A New Car?
The amount of money that you save depends on the type of vehicle you want to own. Many factors influence how much you can expect to pay for a new car. You'll need to consider the type of vehicle that will meet your driving needs. Ask yourself if you plan to use the car to tow your kids around or if you need something to haul heavy loads. You may want something for your commute, which means finding a fuel-efficient model.
In general, most experts recommend spending up to 35 percent of your annual income on a new vehicle. This equates to $21,000 if you earn $60,000 each year. You'll also need to consider other debt that you may owe to avoid spending the rest of your budget on a new car.
If you need to finance your new car, you'll need to compare rates between different lenders to find the best deal. The interest rate will affect your monthly payment. You'll also have a higher down payment if you decide to borrow more money. For the down payment, try to put down at least 20 percent of the purchase price of the car, which will make your monthly payments more affordable.
What Is The 30-Day Rule?
When you're attempting to save money for a new car, the 30-day savings rule is a great method that can expedite the process to ensure you get the keys to your new set of wheels quicker. This will require avoiding making any purchases that are unnecessary for a month.
If you want to make a purchase, you'll need to give yourself at least 30 days to think about it. After 30 days, you can allow yourself to buy the item you want to purchase. In many cases, you may find that you forget about many of the products you want to buy. This is an easy way to avoid spending money on items you don't necessarily need. The money you don't spend throughout the month on impulse purchases can be put towards your new car.
The 30-day rule is an effective way of saving for a new car because it's simple and easy to follow. It also helps you to develop self-discipline when it comes to how you spend your money. You can learn to be patient with items you really want to purchase and realize how many items you didn't waste your money on because you chose to wait and think about it.
When you're getting started on the 30-day rule, start by identifying your wants and needs. Consider the essential purchases that you have to purchase to survive, which include food, gas, toiletries, and medication. Avoid unnecessary purchases like trips to the nail salon, electronics, and dining out. It's important to get into the habit of asking yourself if something is essential or non-essential every time you pay for an item or service.
Set Up A Savings Account
Building your savings account should be a part of this plan to avoid spending the money you accumulate. A certificate of deposit or high-interest savings account can allow the money to grow which depends on the interest rate and amount of time your money sits in the account. Don't touch the money until you find the new car and negotiate the selling price.
Automating your savings will allow funds to be deposited into the savings account without weekly or monthly action needed from you. You won’t have to remember to deposit the money to ensure your fund grows at a steady pace. Set it and forget it, as they say.
Create A Timeline
Creating a timeline is necessary to ensure you meet your goals and stay focused. You may need to purchase a new car in three to six months. Establish a plan that allows you to work hard to save a specific amount each month to ensure you're prepared for buying a new car by a specific date.
Another way to create a timeline is to determine how much you're planning to spend on your new car and divide it by the number of months you have to save. If you don't think you have enough room in your budget to save enough money, you may need to consider buying a cheaper vehicle.
Consider The Additional Expenses
When saving for a new car, many people forget to factor in additional expenses on top of their monthly payment. There are other fees that come with the purchase, which include car insurance, taxes, and maintenance. The cost of fuel is an additional expense that can add up to hundreds of dollars every year.
Estimate how much time you plan to spend on the road throughout the week. You may drive 30 minutes to work each day, or you may only use the vehicle to run errands. Calculate the miles you drive for a week to determine how much you'll spend on gas once you own a new model.
It's also important to research how much you can expect to pay to replace the headlights or change the oil, depending on the type of oil the car requires. If you purchase a luxury car, the maintenance and repairs will most likely cost more because the parts are more expensive to replace. Some models also require premium fuel instead of unleaded, which can increase the cost to drive around each day.