How to Save for a Car
Getting your hands on an auto loan is a multi-step process. As much as an auto loan helps to reduce the financial burden of purchasing a vehicle, there are still costs to bare upfront and month-to-month, so you should find a way to save for a car long before walking into a dealership. To do so, follow the three basic steps below.
Calculate Your Net Worth
A person’s net worth is the difference between owned and owed. With this in mind, subtract all of your liabilities from your assets to get an approximate net worth figure. From time-to-time, perform this calculation and map out your progress. You want to plan for an auto loan during peak performance to avoid throwing your net worth out-of-whack because of an acquired liability.
Knowing your net worth helps you plan for the future as well. Watching your progress can give you the financial knowledge to forecast expenses, cut expenses, plan for future asset purchases, and prioritize savings. This brings us to our next point — how to save for a car by cutting expenses.
Draft an Income-Expense Sheet
As you did with your assets and liabilities, write down all of your income sources beside all of your recurring expenses. Based on these numbers, calculate your savings each month and place this money in an untouchable account. By moving funds into a high-interest savings, you stop yourself from withdrawing every time you use your debit. Although there are still ways to use this money, developing habit and restraint stops you from doing so.
Long before you look to buy a car, you should start a savings plan with three goals in mind: (1) the downpayment, (2) an emergency cash fund, and (3) the first few months. Accumulate enough money to stop the initial lump sum from drastically affecting your bottom line. As well, in case of unexpected maintenance work or a pre-mature insurance claim, always leave a bit of money aside. Lastly, while coming up with this cash, protect yourself from possible lost wages down the road. By covering all of your bases, neither your net worth nor expense sheet should suffer.
Distinguish a Need from a Want
So your next door neighbour splurged on a luxury sedan? Great! Refrain from jealousy or a desire to follow-suit because your bottom line is all that matters. For this reason, weigh your needs and wants carefully, finding a middle ground between economy and extravagance. It’s important for you to enjoy your vehicle, but to do so safely, without hurting your financials for years to come.
To help in the search, write down all of the “necessary” car features (i.e. number of seats, safety rating, air conditioning, power locks, etc.) and all of your “wanted” car features (i.e. sun roof, subwoofer, custom paint job, etc.). Once your list has been itemized, prioritize your wants and select an affordable top three. This way, you feel as if some compromise has been reached while still staying needs-oriented and budget-conscious.
Browse the Lot
If it helps, bring your three lists to the dealership to stunt the impulse urge to buy! Similarly, bring these sheets to a salesperson and ask the experts for assistance. Like with your credit, Trillium Auto Group professionals will sit down with you and help you make the right decisions based on your budget and lifestyle. Start saving today for a more affordable tomorrow and pop-into Trillium Auto Group when you are ready to start exploring vehicles!