Buying the first car in your life can be overwhelming. You spend hours in research to choose the best car for yourself. You consider if you want a Coupe, Sedan, Small SUV, Truck, Hybrid, etc. Then the features of a car determine if it suits your daily needs or not. Anyways, it is not that easy as it sounds to do. You cannot just simply go to a dealership and buy your favorite car by looks or maybe the brand.
When you are done considering the features of the car you want to buy, you have to look for the options through which you can buy a car. If you are earning well, then you can save per month from your current income and buy a car in few months. On the other hand, you can save money for a down payment and get your favorite car one lease.
How To Save For Your First Car
Set A Goal
Firstly, you have to figure out the goal to buy your first car. If you want to buy a new car, then you have to save a whole lot. The average price of a new car is around $30,000. Saving this much amount will take more time than you have planned. So, you can finance your favorite or decided car from your bank or other services.
You have to pay at least a 20% down payment, which means that you have to pay $6,000 for a down payment of the car. This is just a sticker price because while financing, there will be process fees or dealer fees that can reach up to $1,000. More or less, you have to pay around $7,000 to finance the car.
You have to be careful about the hidden fees and costs. There will be taxes, delivery fees, and other fees that can increase the amount of down payment. Don’t fall for the window sticker or online finance prices of cars.
Determine The Savings Plan
After research and visiting the dealerships to look for the best car for your daily needs, you need to make a savings plan. You will get to know that how much a good car will cost to buy it. For example, the car that best fits your daily needs is $10,000 and you plan to buy it within 12 months without borrowing any loan.
If you are making $3,000 a month then you can simply do that math. You have to save $900 a month, then after 12 months, you will be having $10,800. The extra $800 can be used to pay for the insurance for a few months.
Reach Out to Your Parents
If you are a college student, then you want to maintain a high degree of freedom from your parents. Perhaps, your biggest motivation for learning how to save for your first car is because of the reason that you are tired of borrowing your parents’ car. It is a strong indication of responsibility and self-independence.
Your parents or guardians are the only ones in your life who want you to be successful. This is the reason that will give you enough confidence to ask them for a little financing. No parent will say no to their child if they are offering to save 50% on the purchase price of the car and plan to pay the auto insurance on their own.
Increase Your Current Income
After determining the savings plan, you need to have a decent net income to save consistently for 12 months. A decent net income is what you are left of after paying utilities and debts. So, if you are making $3,000 a month, then it won’t be enough to meet the ends of your monthly expenses. You can increase your income by applying to a better job or do extra jobs to get more money.
If you are good at creating computer software or designing websites then you can work as an online freelancer. You can create your website or start working on online freelancing websites. Hence, you will be having extra money to save or use for your monthly expenses. If you are earning a handsome amount from online freelancing, then you might be able to save the targeted money in lesser months like 6 or 9 months.
Ditch Credit Cards
One way to increase the net income is to reduce or eliminate unnecessary expenses. If you take a close look at your current and past monthly expenses, you will get to know that you have been making unnecessary expenses through your credit card. You might have bought a thing that was not even of your need.
Avoiding the expenses or spending done through credit cards can reduce your net income. If you are a college student then your credit card will be having high interest rates and creditors tend to take advantage of the college student’s bad credit rating. Some credit card companies charge up to 16% interest. For example, if you spend $500 on credit each month, then you will be paying $80 in interest.
For better savings, you can switch to a debit card and Daily Prosper can help you manage a declined credit card. The debit card motivates you to balance your expenses and savings because you will not be having extra money for unnecessary stuff. The debit card account pays for goods and services if you have deposited money in the debit account.
Open A Fixed Savings Account
One way to make your savings plan successful, you have to hinder or limit access to your savings. During your savings period, there will be a lot of temptations around you to break the piggy bank to buy that stuff. You might go on a trip with your friends on summer vacations, go to concerts, buying a gadget, etc.
Smart savers help you to keep your savings safe from temptations. The fixed savings accounts are tough in terms and affordable which discourages you to withdraw the money prematurely from your account. Some banks withhold 30% of your savings if you withdraw the money before the agreed date.
If you are having $3,000 in your fixed savings and you decide to withdraw it after 6 months instead of 12 months, the bank will be withholding $900. It might be painful for you to lose money from your savings.
Save For Auto Insurance and Gas
Once you have reached the saving goals and purchase the car of your dreams, you have got the responsibility of taking care of your car. You will be responsible for the needs of your car. By law, car owners are required to have auto insurance to cover any kind of mishaps. The insurance premiums are not included in the purchase price of the car. So, you take the car out of the dealership, you have to be careful.
You never know when the prices of fuel skyrocket. If they go high just after you have purchased your dream car, then you will end up spending your net income on fueling your car. Hence, you should be saving money for future fueling expenses to provide a decent cushion.
First Car – Saving Money to Buy One
When you are tired of borrowing your parents’ car, you get motivated to buy your car. As a result, you start researching the best car that lies within your budget and fulfills your daily needs. For this purpose, you might want to save money for few months so that you can arrange the down payment or total cash to purchase the car.
After a successful savings plan, you will be purchasing your dream car. Also, you have to save enough money to support you for auto insurance, fuel expense, and other car-related expenses.