Transport is crucial for a great deal of Americans, whether it’s for their work commutes, traveling to school, or simply picking up groceries every now and then.
The issue lies in the fact that buying a car is no laughing matter, and it could set you back thousands of dollars, especially if you’re looking to buy new, not used.
A single new car can average around $48k, and with the automotive industry taking a hit from all the supply shortages, the prices are only going to go up as time goes by.
On top of this, finding the right car for your needs can be exhausting, and with so many models out there, you could spend days, weeks, and sometimes even months looking for an affordable transport option in your area.
Thankfully, several budgeting strategies could get you there in no time, allowing you to save up and set aside enough money to buy your first car with ease, and you may just do that if you follow along and keep reading.
Calculate your down payment
Before you even decide to head to the car dealership, the first thing you should do is calculate exactly how high of a down payment you can afford at the moment, and if it’s not enough, you may want to re-evaluate your options.
Most car lenders will require money upfront, and while it’s a lot to ask, especially for some lower-income individuals, the greater amount that you put forward, the less you’ll be paying every month, reducing your interest rate as well.
Essentially, you should aim to save around 10 to 20 percent on your car’s down payment, and if you budget properly, you may be able to put down a larger payment, which could lead to a lower interest total.
If you’re looking to buy a new car, you may want to put down around 20%, which is highly recommended for vehicles that just made it off the production line.
On the other hand, if you’re buying a used vehicle, around 10% should be enough to make the car’s interest rate and monthly payments manageable.
Typically, new vehicle loan payments average around $671, whereas used vehicle loans are somewhere around $470, although these numbers are prone to change as the market adjusts to global changes.
Much like with a down payment, you’ll want to figure out how great of a monthly payment you can fit into your budget, and you’ll want to take note of all your other monthly expenses too, such as utility bills, housing payments, grocery and gasoline costs, and more.
Essentially, you shouldn’t go over 10-15% of your monthly income with your new car payment, and if you’re leasing or buying a used car, you may want to consider allocating up to 10%.
There’s no point in buying a vehicle if you can’t afford the monthly payments for it while also living comfortably, so don’t dive in without knowing what you’ll be dealing with.
Remember, there are additional costs
Apart from the car payments themselves, buying a vehicle comes with a load of other expenses, including car insurance, which is yet another monthly payment, although some companies offer a semi-annual or a yearly plan for this.
Before getting insurance though, figure out exactly how much of it is required in your state, and when you do, find the coverage that best suits your needs and circumstance.
You should also set aside a budget for the vehicle’s maintenance, as you can’t expect it to run properly without taking care of it, and these costs can vary from car to car.
Because of this, you should shop within your means, although some manufacturers will offer one or multiple maintenance visits as a bonus that comes with purchasing their vehicle.
Finally, there are the gasoline costs, which are likely to take a huge chunk out of your monthly budget, especially now that the average price is around $3.76/gallon.
Unfortunately, the US Energy Information Administration predicts that in 2023, this average price will only go down by around 10 cents/gallon, meaning that you won’t be saving a whole lot by waiting for a better opportunity.
This is why another thing to factor in when looking for a car should be that it has efficient gas mileage, as it can help you make several trips less to the pump every now and then, inadvertently saving you even more money.
Set up a savings plan
When thinking about a car, it’s easy to have a vague goal in mind, but working towards it becomes much easier if you’re able to put a precise number on it.
By doing this, you can easily determine exactly how much money you’ll have to save every month to be able to afford a vehicle that suits your needs.
Buying that dream car may be out of the question, but as long as it’s reliable enough to get you from point A to point B, it should be enough for your first car.
Saving money may require you to make some sacrifices though, and subscription services like Netflix may be the first thing to go, especially if you weren’t that much of a movie buff, to begin with.
Additionally, you may want to consider opening a savings account separate from your checking account, as doing this will make it much more difficult for you to dip into these savings every now and then.
If you have trouble doing these transfers yourself, there are several apps that offer the ability to do it for you, automatically and with no additional payments.
We’ve all dreamed of the moment when we’ll sit behind the wheel of our dream car and take on the world, and while other obligations prevent us from just riding off into the sunset, we’ll still need that method of transportation.
Some of us need it more than others, and having access to a car makes one’s life significantly easier, especially if they’ve got long work commutes and make regular trips to the grocery store.
Unfortunately, these hunks of metal with 4 wheels do tend to cost a pretty penny, and actually affording one can be a herculean task, especially for low-income individuals and families.