While some people are able to live a car-free lifestyle (just check out our Awkward Money Chat from 2014!), sometimes it’s simply not practical for everyone. Whether you have a long commute on a busy freeway or regularly deal with inclement weather, owning a car is a necessity in a lot of places. However, one of the tricky things is figuring out how to save money for a car. With all of your other expenses, how can you justify setting aside money for an asset that depreciates as quickly as an automobile?
Don’t worry, you don’t have to sell your reproductive organs on Craigslist to afford a car! There are simple and (mostly) painless ways to make it happen. Whether you’re looking for a tricked out convertible or a reliable hybrid, we’ve got some strategies to help you out.
Set a Budget
If you’ve been a regular reader, you know I’m a fan of budgets. I even made a free budget template to help you kickstart your financial future (did I mention it’s free?) You could check out the post I wrote about building a budget from scratch, but there’s no need to go all hard when I created a free budget template for you! Just download my template and make a note that some of your savings will be going to saving for a car.
Once you’ve got that sweet budget squared away, take a minute to digest this fact: according to Edmunds.com, the average used car prices set a record in 2015, reaching $18,600. And that’s a used car! New cars are even more money, roughly over $30,000 depending on the type and all of its features. Yowza.
That’s a lot of money! Even if you found a car for $15,000, you’d still need to save $1,250 a month for a year to save up all the money you needed to buy the car outright. That’s why setting up a budget for your car purchase is crucial – it helps you determine how much, per month, you’ll need to save to buy a car.
There's a difference between saving money FOR a car (which we'll get to in a second) and saving money ON a car (which we'll also get to in just a minute.) In addition to getting the best “deal” on a car, you need to shop for auto loan interest rates. I'm serious and SO MANY PEOPLE SKIP THIS STEP IT'S INSANE.
Just a 1% difference in rates could save you thousands over the life of the car. This is crucial if you're going to finance the car instead of buying it outright. Lower interest rates means more money saved, lower monthly payments, and a better ability to continue to save for other goals (like a house or working for yourself) once you've checked the car off the list.
We like LendingTree to quickly and easily compare rates for auto specific loans. Many dealerships will offer to finance the car for you as well, but it's important to shop around first as they may not offer you the best interest rate.
Find a Car That Works for You
If you’re buying a car, you probably want it to last a while, right? The best way to determine if a car is going to be right for you is to check out reputable car review sites and magazines. Kelley Blue Book and Consumer Reports are two of the best places to do research on the right car for you.
In addition to professional reviews of vehicles, Kelley Blue Book also offers consumer reviews. These reviews are really helpful because people provide honest feedback on how their cars are holding up two, three and more years after they bought it, which gives a good perspective on how much a used car may cost you over time.
You can also check out the latest car issue from Consumer Reports to find a car that’s reliable, safe, and fairly cheap to maintain. Consumer Reports does exhaustive testing on new and used cars, which should also provide you perspective on a car that will last a long time. Car repairs, upkeep and maintenance will cost you money, but how much money depends on how well you care for your car throughout its life.
How to Save Money for a Car on a Consistent, Regular Basis
It can be hard to think of ways on how to save money for a car, but one thing that can help you? Consistently saving. Let’s say you’ve found a great used car for $8,500. By itself, that number may seem insurmountable. But broken down by month? It’s slightly over $700.
When saving up for a big purchase like a car, it pays to be persistent and not get discouraged by the high price. Saving for a car, much like saving for a house, takes time and doesn’t happen quickly. However, once you’re driving around in your new-to-you car, you’ll be happy your persistence paid off! Automating your savings to a separate account each month is the best trick I know to make sure these savings get made each month.
Still struggling? Here are some of our favorite ways to save, plus 37 ways to save more money this year.
Side Hustle Your Way to More Money
Remember when I said you wouldn’t have to sell your reproductive organs to buy a car? Well… just kidding! You definitely don’t have to do that, but you might want to consider using some of your free time to pick up a side hustle.
We cover 29 ways to make money in this post, and don’t forget to use your network and skills locally too! While you can always make money on the internet, think about all the things around your community that could make you money right now. Are you a whiz at computers? You might consider offering your skills to neighbors who could use a computer walk-through or a tutorial on setting up their Roku or Apple TV (it’s actually really hard!)
By making extra on the side, you’ll cut down on the amount of time it takes you to save up for your car. Try our free course on starting a side hustle if you're looking to get serious about making extra money each month.
It can be tricky of thinking up ways on how to save money for a car, but by following some of these specific strategies, you’ll be rollin’ sooner rather than later!