A new car is a very expensive purchase. Even on used cars, the price tag can reach up to 15 thousand dollars for something modest, which would adversely affect the budget of every individual. In fact, after rent and mortgage payments, car loans payments are usually the next largest monthly spending item. It’s crucial to know what kind of car you can afford yourself and shop accordingly.
Table of contents
For many people save money for a new vehicle may be a cinch, but in reality, it’s harder than it may be seen. Save money for such things as a house or a car is becoming less popular among millennials. Nevertheless, most of them sooner or later will face the lack of savings even for the down payment. Thus, it’s desirable to take care of your finances. In this article, we will give you few recommendations on how you can save thousands of dollars in couple months to purchase the vehicle of your dream.
Choose the car that fit your needs
A lot of people stumble with the selection, trying to buy a car that does not fit their lifestyle. This is mainly due to the desire to look better in people’s eyes, but it can quickly put you into debt. Pick the vehicle to suits your daily needs.
If you need a city car, look for a small hatchback or coupe, which also will consume less fuel. A small family should choose a suitable van or SUV that will be equipped with everything necessary for the safety of children. Expensive cars for many men will look like a rational purchase (who doesn’t like fast driving, eh?), but we should keep in mind that you’ll have to pay more every month for fuel and insurance. Moreover, the perception of you “being a baller” in the people’s eyes will pass very quickly, yet you won’t be able to return the thousands of dollars you spent on such a short-term effect.
Calculate your desired vehicle payment
Cars are expensive, so paying full price for many people is unaffordable. In this case, you can look towards car loans which will allow you to pay a small car payment every month for several years. In this case, it is better to carry out all the calculations beforehand. Consider your current monthly income, as well as the cost of rent, food, water, and electricity. The remaining amount will be distributed on a monthly car payment, gas, and insurance.
For example, if you have a net income after taxes of $3000 per month, approximately $2000 will be spent on the expenses mentioned above. Of the remaining $1000, roughly $100-150 goes on your insurance (depending on the province). If we take a relatively inexpensive new car at the cost of $15,000 in installments over five years (60 months) at 5% interest rate, you’ll spend approximately $283 each month. The interest rate may vary depending on the credit score of each individual. For those who have bad credit, the interest rate will usually start higher than 5% and can reach up to 30%. Add $100-150 which you’ll spend on gas, and periodic maintenance costs, like oil changes or new tires, and you’ll get a complete picture of your monthly spending on the car.
Estimate your down payment
The down payment on a new vehicle depends on your personal finances and responsibilities, as well as the cost of the desired car. If you already have some financial responsibilities, saving for a big down payment may not be feasible. If purchasing a new vehicle is a necessity, then you have virtually no time to accumulate big bucks for your initial car payment. If you have few financial responsibilities, for example, you live in your condo and don’t pay monthly rent, then you’ll be more likely to stash away more cash to purchase the vehicle you want.
The price tag comes into play when talking about down payments, mostly because the cost of the vehicle determines how much the car will cost overall. For example, if you purchase a Nissan for $18000 and make a down payment of $5000, it will be a large down payment. On the other hand, if you buying an Audi worth $50000, a $5000 will be a standard low down payment.
Don’t rush into buying a new vehicle
Timing is also an important factor that you need to take into account if you want to save money for a new car. We all want to get behind the wheel of a new Chevrolet or Toyota as soon as possible. However, only cold math will save your money. Don’t be impatient or unrealistic here. If you have just brought home your first pay cheque of $3000 and need a down payment of $5000 for the car you dreamed before… Well, it isn’t going to happen, not yet at least.
Of course, you can find a more affordable vehicle or go ahead with a used one. On the other hand, nothing terrible will happen if you postpone the purchase by a few months. This period will help to strengthen your financial situation and reduce your future monthly payment.
Don’t punish yourself while saving
It is crucial to keep your finances in good condition and have a good plan to accumulate the necessary funds for the purchase of the vehicle. However, at the end of the day, it is easy to forget that the ability to relax will also help you to save extra money. It could sound senselessly, but it’s the small treats that can keep you in a good mood and give you chances to live a full life. If you fuss over every penny, you’ll feel frustration after every spending. It can psychologically affect you and your surroundings in a negative way.
Therefore, if the reduction in daily coffee consumption from two cups to one can significantly save you money, there’s nothing wrong with treating yourself with a latte or cappuccino once a week. Additionally, it’s okay to wind up skipping your plans to visit Machu Picchu or the Himalayas, and instead settle for a two-day trip to a campground or a to visit one of the many beautiful small towns within Canada.
Summing up, saving money is a necessity for the majority of individuals who plan to have their own property or a new car. Saving money shouldn’t feel like a punishment, but more like a daily habit. If you can teach yourself to save money and not to infringe on your needs, it’s more likely that you’ll be able to accumulate the necessary amount of money for you new car in a short period of time.