We all have that one thing we have to buy. For a lot of people, that one thing is a car. The average person doesn’t have enough money lying around to go out and just buy a car. If you’re reading this, you are interested in ways to save for your new car. In this article, I will explain just how to do that.
The first thing to do is to define your target. How much do you think you can realistically save within a given period of time? So, determine what your monthly expenses are. If you do not do it already, you should keep track of your monthly expenses, such as your phone bill, student loan payments, utilities, mortgage, credit card and insurance. All your monthly expenses count, even your gym memberships, groceries and cable.
The residual amount, or what you have left at the end of the month, is your “disposable income”, or the amount of money that you can afford to spend on something of your choice. Ths number will tell you how big a loan you can get based on the amount of money you can pay each month, or, how much you can save each month.
You also have to remember that you will also assume car-related expenses when you buy a car. So your disposable income goes not just to buying the car, but to getting insauce, making repairs, and other such things.
Pick a Car
Once you have defined your budget, you can narrow down the kind of car that you can buy, based on your budget. You will have to assess your needs; consider alternatives within the class of car that you want to buy; assess the costs of ownership (for instance, one car might depreciate at a faster rate than another, or it may cost more to get it insured or to maintain it); among other things. When you have decided on the car you want, given your economic constraints, you can start to look at whether you should buy a car on sale, and weigh what price you can pay for that car, based on fair values of new and used cars given in the Kelley Blue Book.
Decide Between a New and Used Car
A brand new car comes with a lot of value because of better warranties, as well as lower interest rates and the fact that you know much more about a new car’s history than a used one.
However, new cars obviously cost more than used cars and they depreciate much faster, and they have higher insurance premiums. It’s not like you can get your car looking like new just by taking them to the local garage, like you can fix up your injured pet by taking it to the local animal hospital. Also, typically, you will have to make monthly payments for years before the car is actually yours. It’s hard for many people to commit to this kind of situation.
Used cars have lower insurance premiums, lower monthly payments as well as lower registration costs. This combination of factors can make owning a used car very attractive. It’s also much easier to save to buy a used car and buy it in one go. The downside of having a used car, however, is that it will not have a warranty and repair and maintenance costs will be higher. Understand the trade-offs before making your decision.
Determine the True Cost of Owning a Car
Once you have figured out what your disposable income is, what type of car you want and whether it should be used or new, you will have to calculate the true cost of the car. As we suggested above, a car’s cost of ownership is not just the sticker price of the car. You have to factor it maintenance costs, repair costs, insurance costs, fuel, and other costs that go into owning that car. A lot of people get into trouble because they underestimate the true cost of owning a car and end up in debt or struggling to survive.
Once you have all these considerations in mind, you can then get a car title loan estimate, knowing precisely what you can afford to pay in monthly payments to service a loan to buy the car of your dreams.