Whether you’re sixteen or fifty-six, buying a car is an important decision. More than simply a rite of passage into adulthood, it’s a big financial choice. Purchasing a car can be a status symbol, a practical move simply to transport you to and from work, or a necessary task to ensure you have ample resources for your family.
If you’re not confident about where to start, though, it can be a bit overwhelming to figure out how to save money for a new car.
Different Options for Buying a Car Cheap
Regardless of what commercials on TV tell you, buying a brand new, $50,000 Land Rover is not the only option you have. In fact, there are many different choices that can make finding the right vehicle more affordable and fit within your budget.
Don’t succumb to the pressure of shelling out more money than you can afford to get the right car for your lifestyle.
Leasing a Car
Outside of purchasing a new car, leasing is actually another affordable choice. There are individuals that will tell you to never lease a car under any circumstances, but it may be a potential decision to investigate.
The reasoning against leasing a car is that you’re still paying for an asset that you don’t own and you have less control over the vehicle (in terms of maintenance, mileage, and damages). This neglects the fact that leasing is oftentimes a cheaper option, as well as the fact that cars are depreciating assets anyways – meaning they are not meant to hold their value over their lifetime.
Leasing may be an option to explore. However, you should know that leasing still typically requires a down payment, and your credit history will still be examined.
Buying a Used Car
Another option to make a car purchase more affordable is finding a nice, used car.
The truth is, cars depreciate in value almost immediately. The joke goes that a car loses $5,000 off its value the second it leaves the lot, and it’s true in spirit. If you peruse the classified ads or sites like Carmax for used cars, you’ll find that a 1 year old car with 20,000 miles on it is significantly cheaper than a brand new one – or even one the same model year that has been sitting on a dealer’s lot that entire time.
Is it a worse car? 99% of the time, it’s in near perfect condition. This holds true for cars that are even older. A five year old car will often cost less than half the price of a brand new one, and will function just as well.
Creative Ways to Save Money for a New Car
Now that you know some options for finding a more affordable vehicle, or paying less for the same exact one, we still have to figure out how you’re going to stash some extra cash for it.
Let’s be honest, cars are not cheap, so whatever you can do to cobble together extra money for it will help in the long run.
Take on Extra Work
The first option is to take on extra work. If you work at a job that allows you to work overtime or take on additional hours, this can be a great solution to get yourself over the hump for your down payment.
Unfortunately, that’s not the case for everyone. If it’s not possible to work longer hours at your job, or if it’s unfeasible because of your family or living situation, there are still ways to earn extra income and save money for a new car.
First, you can start a side hustle. There are many articles across the web that explore unique ways to leverage your skills and time to make extra money, such as blogging, taking surveys, flipping products, and much more.
In fact, if you’re interested in starting a side hustle or engaging in what’s called the “gig economy”, you can take a look at the resources and articles on this site to help you find the perfect solution to make extra money from your phone or computer on your own time.
Cut Back Expenses
The next solution is the opposite, but a very obvious one. If you can’t earn more money, spend less of it.
There’s a lesson to be learned that we can often spend much less than we’re currently making. Take a close look at your finances and you’ll see where you can make cuts.
One of the most common touted budget cuts is “stop going to Starbucks”, but that’s honestly probably not the biggest issue most people are facing.
Try to go one month without eating out and see how much money you can save. Perhaps you’ve nailed down and reduced all of the variable expenses already. That means it’s time to look at things like your phone bill, your Netflix and Hulu accounts, or your Cable subscription.
Can you temporarily reduce your spending on those to save some extra cash? Even a few dollars here or there can help drastically.
A car is a big expense whichever way you slice it. Fortunately, not all car deals are created equal.
As mentioned above, not only are there ways to save money for your car purchase, there are ways to make finding the exact same car a little cheaper.
Down Payment’s Impact on Monthly Expenses
Buying a car, or purchasing anything with a loan or a lease, involves more expenses than strictly the sticker price. Any recurring monthly charges will be calculated based on interest rates and credit score, as well as the loan amount.
To simplify, the total remaining value of the car (after a down payment is placed) is divided using a formula that accounts for the interest rate. You pay this new price every month for a specified period of time.
So, over six years, for instance, you will pay a couple hundred dollars a month for a $10,000 loan.
The thing is, if you finance a lower loan amount, you will pay less each month, which means you’ll pay less interest in the long run as well. If you put a larger down payment down at the beginning, your loan value will be lower, which means your monthly cost will be lower in the end.
This is an important financial consideration for your future monthly expenses.
A Depreciating Asset
All told, it’s important to remember that a car does not hold its value, unlike a house or similar investment. Cars lose their value over time, which is important because it means that it’s not helping you build wealth.
For that reason, it’s typically smart to spend less money on a functional, high-quality car instead of shelling out top dollar for a luxury vehicle. In the end, it’s your decision, but it is an important point to consider.
Save for a New Car and Pay Less
Buying a car is a big deal. Do it right by taking the time to save up a good down payment and reduce your long term expenses.
If you know your options, you can set yourself up to save a lot of money in the long run, and still have a quality vehicle that fits your needs perfectly.