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Savings Tips for a Down Payment on a Car

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The cost of owning a car can seem insurmountable. It’s not just the cost of the down payment you have to consider, either. There are insurance payments, maintenance fees, repair costs, and the fluctuating cost of fueling up. No doubt, a car is expensive, but by establishing a budget, taking a realistic look at your finances, and curbing unnecessary spending, you’ll be able to save enough money for a down payment on a car.

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First step is figuring out your down payment and what cars fit into your well-researched and realistic budget.

“Once you zero in on the price range for a car you can afford, calculate your down payment. Aim to put 20% down on a new vehicle and 10% down on a used vehicle,” advises NerdWallet writer Lauren Schwahn.

You’ll want to incorporate car-related expenses into your budget, too. NerdWallet recommends breaking down your income spending and saving into three categories: 50% to things you need; 30% to things you want; and 20% to debt repayment and savings.

“Many experts say that all car-related expenses shouldn’t exceed 20% of your take-home pay,” writes Schwahn.

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Getting closer to your down payment goal will require sacrifices. She suggests taking a closer look at unnecessary spending as well as trying to negotiate lower payments on things you can’t live without and directing any amount saved to your car’s down payment fund; a separate savings account that you regularly contribute to will get you closer to car ownership.

Finding ways to earn money through a side job or part-time work can speed up the savings-process, too, notes Schwahn.

News Source: NerdWallet