Now, it should go without saying that just because the average vehicle transaction price is around $33,500 doesn't necessarily mean that you'll be paying that much for one. And financing options make affording a new car more feasible. Yet, it still makes sense to save for a larger down payment if you plan to finance, as you'll pay less interest on auto loans for purchased cars and less overall on monthly payments if you go the leasing route. The best money-saving way to buy a car, however, is to purchase it outright.
Whatever your situation, saving is important for that new car. Here's a look at planning for that new car purchase and how to save for it.
Proper Planning is Key
While coming up with some sort of a savings plan is a great idea no matter what type of car you're in the market for, it helps to go into things with a plan of attack. So decide what type of car you're looking for, come up with a monthly payment amount that you're comfortable making (if you decide to finance or lease a vehicle) and then work backwards to calculate approximately what you'll need to save for a down payment. If you're planning to purchase a vehicle outright (whether it's new or used), saving for it becomes a bit more complicated, as you have to consider the total cost of the vehicle in your plan. Regardless of the car-buying route you take, it makes sense to start the planning process well in advance of when you plan to make your purchase and set a goal that you strive to hit.
Establish a New Budget
Saving money to put toward a purchase is one of those things that's much easier said than done. That's why it's extremely important to actually sit down and establish some ground rules in terms of how you're going to meet your financial goals. For instance, take a look at your take home pay and calculate how much disposable income you have each month. If you have, say, $400 of disposable income each month, consider putting $200 or so aside to put toward your new car purchase. You may also consider putting more toward it, depending on how soon you plan to shop for one.
If you're already in a tight budget crunch and can't manage to put aside any money toward saving for that new car you desperately need, there are other options for you to save. Start by analyzing your current bills. While you can't compromise much on utilities, you can save some money by decreasing your cable TV package, seeing if you can adjust your phone plan to a lesser data plan (or talk and text plan) or taking brown-bag lunches a few more days each week. You may have to get creative, but when there's a will to save money, there's a way to make it happen.
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Consider Other Sources of Revenue
The money you set aside for saving for a new car doesn't exclusively have to come from your regular paycheck. There are a few other sources that you may be able to tap into to help boost these purposes:
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Selling Your Current Car: If you want to help out your car savings plan, we strongly recommend selling your current vehicle. Nowadays, this can be coordinated fairly easy online, so do some research and come up with a fair price for your car that reflects its condition, mileage, etc. Generally speaking, you can get much more by selling your vehicle than you can by trading it in toward the purchase of a new car with the dealer, so it makes a lot of sense to explore this route.
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Bonuses: During the holiday season, many employers are fortunate enough to be in a position where they can reward employees with bonuses. On a similar note, many employers will also award quarterly bonuses to employees based on total company performance. For commissioned employees, bonuses may be awarded after hitting annual or monthly goals. Some - or all of - the earnings from these "extracurricular" opportunities can help in your quest to save for a new car.
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Tax Returns: If the holiday bonus doesn't work out, tax season is right around the corner. And if you're among the 80 percent of all Americans who receive some sort of tax refund, these extra funds could be a big asset toward shopping for that next new car.
Use Technology to Your Advantage
While we've covered various tips for saving money, we'd be remiss if we didn't mention how mobile apps can help you stay true to accomplishing this. Budget apps, such as Mint, are available for the iOS and Android operating systems, and can be modified so that alerts are set when you're at risk of jeopardizing your goal. In other words, these apps can help keep you honest to a certain extent when you're budgeting and saving for any type of large purchase, let alone a car.
Other Tips and Tricks
While these next few tips don't specifically have to do with the actual process of saving up money for a new car, they may alter the budgeting process and how you actually go about saving for a new vehicle. Here's a closer look:
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Insurance premiums: Insurance premiums are related to the potential cost of damage and injury, so it makes sense that larger vehicles equipped with more safety features are cheaper to insure than high-powered, tiny sports cars. Check with your agent on the vehicles you're considering before you start car shopping to get a ballpark idea of what you'll be on the hook for in terms of insurance costs.
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Time of month/year: You can typically get better deals on new cars through a dealership if you shop at the end of the month compared to the start of it. That's because dealers have monthly quotas to meet, so they're more apt to negotiate with you at the end of the month. Furthermore, at the end of the year, many dealers offer great discounts on previous year models so they can make room on the lot for new model year vehicles.
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Rebates/discounts: Be on the lookout for rebates and discounts if you're purchasing your new car from a dealer. If you have friends or family members who work in the auto industry, you may even be able to secure employee discounts. Every little bit helps!
As you can see, while it can be hard to get motivated to save for a new car, it's truly possible to come up with a plan that will help you get the vehicle you want. You just have to commit to the process.
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