Tips for Putting Aside Cash for a Vehicle
Are you looking to upgrade your vehicle? Saving money for a car can feel intimidating if you aren’t sure where to start. If you are ready to budget for your next ride, learn how you can save money for a car at Broadway Credit.
Calculate Your Down Payment
First and foremost, you should figure out how much cash you will need to close the deal on your next car by calculating your down payment. After all, saving for the down payment is the hardest part as this requires the most money at one time.
Let’s say your goal is to spend no more than $3,000 on your down payment. Generally, your down payment should cover at least 20% of the cost of the vehicle. So, if you wish to spend $3,000 on a down payment, the vehicle you buy should not exceed $15,000.
Budget for Car Payments, Insurance Costs, Gasoline, and Other Car-Related Expenses
You will also need to budget for car-related expenses after purchasing the vehicle. For example, let’s say you purchased the $15,000 vehicle with your $3,000 payment with a four-year loan for a principal of $12,000. For the next four years, you can expect to pay $250 plus interest every month for the next four years until the vehicle is paid for. On top of this car payment, you should calculate roughly how much gas you expect to buy every month, find quotes from insurance companies to see how much insurance would cost, and budget for any miscellaneous fees like title and registration.
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Trade In Your Current Vehicle
No matter how old or new your current vehicle is, it will have some value that you can apply towards your next car. Let’s say your current car is worth $2,000. Instead of borrowing the remaining $12,000 for your next vehicle, you will only have to borrow $10,000. By trading in your current vehicle, you can lower your monthly payment and the amount you pay in interest over time.
Control Your Spending and Put Aside Cash
Once you have an idea of how much money you need, it’s time to plan your budget. The easiest way to save some money is to control your spending habits and put aside the extra cash in your savings account. For instance, you should review your expenses and see which ones you are okay with lowering or eliminating, such as going out less or canceling a subscription. If lowering your expenses seems difficult to do, try earning some extra cash by selling some things you don’t need or picking up a side hustle.
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