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Having a car seems like more of a necessity nowadays than what it was in the past. There are still forms of public transportation, like city buses, but if you do not live close to major cities, it may be difficult accessing these.
With overcrowded cities, more people are moving to the outskirts of major towns into suburban neighborhoods. Depending on how far a person works from their home, they may need to find alternative ways to get to work if they do not have a car.
Over time, those alternatives can grow costly and that is when people usually begin looking into buying a car.
As someone who prefers living on the outskirts of Atlanta, a major city that is always busy, I found myself in this position. During my college years, I lived about an hour away from campus because of traffic on the main highways. Having a reliable car to get me from Point A to Point B quickly became a necessity.
I began saving money to buy a car to minimize the amount I would have to borrow. Throughout the process I found myself leaning towards buying a used car. So I had to consider all of the factors associated, like the requirements for buying a used car insurance and if the car would hold up for a good number of years.
In the end, I settled on buying a newer car that was used. From that experience, I learned how to effectively save money for a car. Here are some tips so you can save too and still purchase a reliable vehicle.
Before you can come up with a saving plan, you need to first figure out what kind of car you want. The type of car you have is important because it determines how much you will have to spend on car insurance, how much money on gas you will spend. The type of car also affects how much you will need to put aside monthly for routine maintenance or any necessary repairs.
Aside from what kind of car you have in mind, you also need to figure out what you can actually afford. All the factors mentioned above, the cost of your ideal car, and if you will purchase with all cash or put down a down payment are things to consider before you can create a budget. Crunching the numbers will also let you know if you can actually afford the car you have in mind.
While making your budget, you can formulate it into a 50/30/20 budget model. This is where 50 percent of your monthly income is allocated to needs, 30 percent to your wants, and 20 percent to savings and debt repayment.
Depending on your circumstances, you can decide to place a car under the needs or wants section of your budget.
At the end of drafting your budget, you will have a clear idea of what you can afford, if you can afford your ideal car, and if you need more income to afford to have a car. If you have never created a budget before, you should consider making it a part of your routine.
As an adult, there are many reasons budgets help you stay afloat financially.
After you have your budget and your affordable, ideal car, you can calculate the amount of money you will need for a down payment or how much money you will need to buy the car outright if you are paying cash.
Compare the cost of similar makes and models to your ideal car, and then find a number that is in the middle of those costs. You can use that middle number as an estimate for what your ideal car will cost you. You should aim to put 20 percent of the estimated cost down for new cars and 10 percent down for used cars.
When purchasing a car without a loan, you can look for legit side-hustles to funnel in enough money to cover the entire payment of your car.
The more difficult thing to do when purchasing a car is saving money for it. Some people find that making a budget, finding a car to buy, and even negotiating with a dealership can be easier than actually saving money.
If you never set a deadline to have all of the money saved, you will be saving forever and may not ever get the car you want.
To estimate a timeline, take the total cost of the down payment that you can make or the full cost of the car and distribute it in regards to how much you can put aside a month.
So if you need to save $5,000 but can only save up to $500 a month, you can set your goal deadline for 10 months out. If you can save more in those 10 months, that will even be better for you.
Keeping the money you intend to use for purchasing a car in your checking account can be tempting. So now that you have an estimate of how much you need to save, you can open a savings account to store the money.
This savings account should be separate from your regular savings account. Also, It can be beneficial to have a savings account that pays interest so you can have a little help increasing your savings. Having one that limits the number of transfers you can make is beneficial, too.
You should set your account to automatically transfer money savings so you never have to remember to transfer money. You can set regular contributions with minimal effort and transfer in more funds outside of the automatic payments whenever you get extra money.
You will have to limit eating out, spending money on clothes, and anything else that may not be a priority for you and your family at the moment. There are apps and management systems like Google alerts that are designed to help you save money.
Finding ways to reduce recurring expenses such as cable and groceries will also help you accumulate the extra funds you need.
Imani Francies writes and researches for the auto insurance comparison site, AutoInsurance.org. She earned a Bachelor of Arts in Film and Media and specializes in various forms of media marketing.