3 Steps to Saving for Your Car Purchase
There are a number of reasons you want to save up to buy a car. First, you’ll get a lower interest rate if you put a larger down payment down on the car. This lowers the risk the lender is taking when they loan you money. Second, it ensures that you aren’t going to end up upside down on the car, owing more than the car is worth. This protects you if the car is repossessed or destroyed in a car wreck. If you can save up enough to pay for the car outright, now you aren’t going into debt buying something that goes down in value. Follow these simple steps to save for your car purchase.
Be smart with your spending
Don’t buy things in the hope you’ll use them. Only buy what you need. Think long and hard about purchases so that you spend less on splurges and indulgences. Be honest when you’re comparison shopping. For example, the generic brands are rarely different from the name brands but they cost less. In other cases, you should stop spending money on little fixes and pay for the work to be done properly. Dedicate all the money you save to a savings account.
Shop around for cheaper insurance
Insurance is one of the biggest costs we regularly pay after taxes, rent and food. More importantly, it is an expense that you can save a lot of money on by shopping around without sacrificing quality. For example, you could save 10 to 30 percent by shopping around for car insurance. You might save money by reducing your level of coverage, demonstrating your lower risk profile or taking steps to lower your risk. You could demonstrate that you don’t drive very far when there is a tracker installed in your dashboard or steering column. You could raise your deductible, lowering the odds the insurer has to pay a claim and thereby reducing your premiums. You might save several hundred dollars a year on car insurance alone, allowing you to save up the down payment for your next vehicle.
You could save money by cutting the unnecessary insurance coverage you have. For example, cancel the insurance for your cell phone and just take better care of it. Get rid of cancer insurance and other niche health insurance policies and get health insurance that covers everything that may happen. Cancel the life insurance or disability insurance you’re paying to your creditors and just have the insurance coverage you actually need. Stop overpaying for insurance paid through your employer, since these insurers know you’ll often assume they are the cheapest when they aren’t.
Pay yourself first
Pay yourself first means putting money toward your goals and then living off the rest. For example, sending ten to twenty percent of your paycheck to your retirement account ensures that you save. It also results in most people reducing their spending to fit their take-home pay. Do take care to negotiate regular expenses like insurance and utilities so that you don’t end up going into debt after you send 10 percent of your pay to a savings account for your future car purchase. Make sure you can’t drain your savings account for incidental spending. Label it your car fund so you don’t raid it when you’re offered a place on a vacation abroad.
This is a collaborative article.
The News Wheel is a digital auto magazine providing readers with a fresh perspective on the latest car news. We’re located in the heart of America (Dayton, Ohio) and our goal is to deliver an entertaining and informative perspective on what’s trending in the automotive world. See more articles from The News Wheel.