Saving for a car is perhaps one of the largest amounts of money you’ll ever need to put away for a purchase. Whether it’s your first car or you’re looking for a newer set of wheels, when you save to buy a car it minimises the overall amount you’ll have to borrow from a lender.
Not only is it likely to minimise your monthly payments, but it will also put you in a stronger position at the dealership, potentially saving you thousands of pounds in interest. To save up for big purchases like a car requires discipline and dedication, but sticking to your plan will make it worthwhile as you’re driving your new car off the forecourt!
Calculate your down payment
The down payment is essentially the deposit you want to pay towards your car. Once you’ve found a car in a price range you can afford, you’ll be able to calculate the down payment. It’s recommended you put anywhere between 10% and 20% down as a deposit. Ultimately the more money you can save up on your own, the better deal you’re going to get!
Set up a savings account
It might sound obvious, but a separate savings account can help you to stay accountable on your saving journey. Having a separate pot for your car deposit money may also make you less tempted to dip into the money to buy other things! If you’ve started saving for your first car as a teenager, it’s wise to shop around for a savings account that has a high-interest rate. That way you’ll be making the most out of the money you’re storing away for later.
Limit any unnecessary spending
You might enjoy indulging in your morning coffee on the way to work or a new top here and there, but unnecessary spending can cause your dreams of a new car to fall further and further away. Switch up your routine and make your coffee at home in a to-go cup to mimic the feeling of getting takeout, and if you love buying new clothes, try shopping in charity shops instead of upcycling your existing wardrobe.
Consider getting a loan as an alternative
There are a number of ways you can pay for your new car. You’re likely to have heard of Personal Contract Plan (PCP) and Hire Purchase (HP) when you visited the car garage, but have you ever considered taking out a loan as an alternative? You may find that with a personal loan you get a much better interest rate than those on agreements that car salespeople will offer you, and have more flexibility in terms of the overall repayment length. Don’t just jump straight into what the garage offer, make sure you shop around to see if there are more cost-effective alternatives!