Your driver’s license gives you the privilege of driving out on the road. Whether that’s going to and from school or work or over to your friends for a movie night, a license gets you halfway there. You’ll need a car to literally take you places. It’s a hassle to have to ask for or schedule around using a car that belongs to your parents.
That’s why it’s such a big deal to own your first car. Even if you buy a used car, the expense of buying and maintaining a car is not pocket change. You need to save up to have enough money to buy a car. Using the easy savings and spending tips explained here will help get you behind the wheels in no time.
SET A SAVINGS GOAL
It’s useful to have a number in mind for any big purchase. So your first set is to decide how much you need to buy your car. The year, mileage, and condition of the car are among the things that go into the cost of a car. Do some internet shopping to find out how much a car that’s similar to what you want will go for.
If you want a newer car, keep in mind that will probably mean you’ll need a bigger down payment. Otherwise, your monthly payments could be very high. 15% is a good percentage of down payment to save up.
Other things you should think about are all the extra costs that are involved with owning a car. This includes things like maintenance (i.e. regular oil changes), car insurance, gas, and tolls. When deciding on what type of car to buy, it’s more economical to choose one that has a history of reliability and is fuel-efficient. Once you’ve decided how much a car will cost, you can move on to the next step.
FIGURE OUT HOW YOU’LL REACH THIS GOAL
Now that you know how much money you’ll need, you need to figure out how to save up the cash. You need to have money coming in to be able to put away to save towards a car. Find out if you’re parents are willing to help out.
But it’s likely that most of the money is your responsibility to save. A part-time job is probably going to be the best source of income. Most of these jobs are likely either in retail or foodservice and pay minimum wage.
Figure out what hours you can work between school and other obligations. You might only be able to work on weekends or a few hours each weekday while school is in session. Consider working full-time in the summers if you’re available to ramp up your savings.
Decide how much of your paycheck you can save towards a car. For example, if you calculated that you’ll earn roughly $400 a month, then you can put aside $250 a month. Or you could save more if you believe you can go with a little less spending cash.
Make sure that you think about when you purchase a car. If it’s a year from now, you’ll have a lot more time to save up than if you want to purchase one in six months. Depending on when you want to buy a car, you might have to become more aggressive in putting more of your paycheck towards your savings. Otherwise, it might make more sense to push it back a few months or more.
PUT THE SAVINGS IN A SEPARATE ACCOUNT
Keeping your car fund in the same account as your checking is like sitting in front of your favorite candy bar all day. Avoid the temptation of spending your money on other things. Using a little bit to go out to the movies and get snacks with your friends or dipping in to buy a new video game will eat away at your savings.
Set up a savings account to deter you from these spending habits. Treat the account like it’s off-limits from any other spending, aside from buying a car. If you earn a consistent paycheck, then each time you’re paid, set up an automatic transfer that movies that money to this savings account.
ADJUST YOUR SPENDING HABITS
While you’re saving up for a car, it’s a good idea to spend smartly. This could be simple changes like having your friends come over for a Netflix binge instead of going to the movie theater. If you’re going out to eat with friends and you never finish a meal, consider splitting one with a friend.
A big one is managing your impulse purchases. If possible, avoid them like the plague. Or you can try the 24 rule where you wait a full day before deciding whether to make the purchase. This waiting period discourages this type of spending for many people.
SPEED UP YOUR SAVINGS
Look for ways that you can put more money towards a car. Do you have a lot of old video games that you never play? Sell things that you don’t use anymore and put that money towards your savings goal.
Money that you get from birthdays, graduations, and Christmas can help reach your car goals faster. Consider trying to pick up some extra work around the neighborhood like mowing lawns, babysitting, or running errands. This money can really add up over time so it’s worth the effort to look for.
BUYING YOUR FIRST CAR
Once you’ve reached your savings goal, you have enough money to buy your first car. How exciting is that! When you head to the dealership, it’s important to remember that you should know what you can afford and what you need. Come in with some estimates on the prices of the car you want.
You might even get pre-approved for a car loan that has a low-interest rate and reasonable loan term. Remember that a longer-term may have lower monthly payments, but you’ll be paying more in interest over the life of the loan and it will take you longer to pay off the loan.
Even though you might have the funds to splurge on some extras, steer away from this temptation. Owning a car is always more expensive than you plan for so you’ll be happy to have some leftover cash to deal with unexpected costs.
Finally, don’t just take the sticker price on the car. Don’t be afraid to haggle because that price is rarely set in stone. Negotiate to get the best price and favorable financing terms.