Save Up for a Car
Have your eye on that new or used car but you're not sure pay for it? This article will help you figure out a strategy to get you in the driver's seat, whether it be a used Toyota Camry or a brand new Audi R8.
Instructions
1. Before you can decide how much you should save up for a car, determine which car fits your needs. Buying a car that doesn't do what you need it to do will end up causing you frustration and lost time/money. Do you commute to work every day and need something gas efficient like a Toyota Prius hybrid? If you haul lots of cargo, how about a Ford F150? Can you save more money buying it used? Buying a used car that is just 2-3 years old (or 10-40,000 miles) is very smart because it allows the first owner(s) to take the major depreciation hit during the first few years while the car still likely has 3/4ths of its lifespan left. Whatever you decide on, make sure this is a purchase that you won't regret. Do your research.
2. Now that you've done your homework, you know an estimate of how much the car will cost you total out the door (OTD). How much do you need to save for a down payment? Or maybe you want to save up for all of it?
If you're going to finance the car with an auto loan, it is recommended that you pay at least a 20% down payment for no longer than 36 months. While longer loans reduce the monthly payments, they will cost you more in the end.
3. So now you know your savings goal. Take a look at your monthly budget and calculate how much you can spare per month for a car payment. Let's say it is $300 and your savings goal for a down payment is $3000, so that is 10 months. Each month, put this money into a savings account (preferably one with a high APY so you can gain some interest) as if you are already making payments on a car. After your down payment, what will your monthly payments be? It should be no more than $300 a month since that is all you can spare. Make sure you take insurance, gas, and maintenance into account.
4. After your savings goal is reached, you are ready to buy. Shop around banks like Bank of America, Capital One, or Wells Fargo, and credit unions for the best rate on an auto loan. Then shop around dealers for the best price on your car. Never fall for buying a car you can't afford.
A few years later, after you have paid off your loan, it may be a good idea to continue putting the $300 in your savings account as though you are still making monthly payments. This will help in case you need it for car repairs or you can even pay off your next car in full, costing you no interest.
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