Wondering how to save money for a car? Whether it’s for your very first set of wheels or an upgrade to your current ride, there are lots of smart ways to save money. We polled 11 experts to gather their best tips for how to save up for a car. Check out their responses, and start saving up for the car of your dreams.
“The best way to save money for a car is to make your savings automatic. Don’t rely on fate to see if you have money left over to save; instead, set up automatic bank deposits so the money is saved no matter whether you remember or not. If you don’t want to do automatic bank deposits, you can also include your car savings in your monthly budget. Pay a car ‘payment’ directly into savings every month until you’re ready to buy and you’ll have a hefty down payment waiting for you.”
“The best way to save money for a car is to combine savings with extra money so you can double your efforts. Find one or two things or services you haven’t used in the past quarter. If you can live without it, that becomes instant savings to throw at a car fund. Combine that with one way you can bring in extra cash. There are so many ways to make extra money, from driving for Uber or Lyft, donating plasma or working Christmas parties during the end of the year. Combine those two, along with shopping for the best possible rate, and you’ll be surprised how much you’ll save to not only on purchasing the car but also interest on the payments.”
“Take any unexpected money, like a bonus, gifts, etc., and put it in a dedicated account to save for the purchase. Automatically save a percentage of your paycheck by setting up a direct deposit to your savings account. Many companies allow you to choose more than one account for direct deposit. Simply add your checking as the primary, and the saving as a small percentage, maybe 5%. By having it be automatic, you likely won’t feel it as much.”
“The best way to save money for a car is to open a free regular savings account that offers meaningful interest. Determine how much money you need for the down payment or purchase. Decide when you would ideally make the purchase, for example, in six months or in two years. Divide the amount you need by the number of months and that is how much you ‘should’ put aside in to that car savings account every month in order to achieve your goal on your timeline. In order make this happen, something else may temporarily need to give while you build up savings. If you’re going to choose to take out a loan, you will also need to consider how much you can afford for the upcoming monthly payment and review your monthly cashflow/budget again to make sure your plan will work.”
“If you’re a two-car family, go down to one car for a while and save a few hundred dollars a month. You may find that you don’t miss the other car and enjoy how much you’re saving. Or, if you decide to buy, you’ll have a nice down payment or be able to pay cash for a future purchase.”
“Save on your commute. Biking could save you the cost of bus/train rides while getting some daily exercise in. Carpooling with coworkers who live near you is another option to save money and socialize at the same time. Get your family and friends onboard. Between holidays, birthdays, anniversaries and other special occasions, you may be anticipating gifts from your loved ones. Let them know you’d appreciate cash gifts this year instead of items or gift cards because you’re saving up for a car. Your family and friends might actually be relieved they don’t have to shop around for gift ideas! Get more cash back on your everyday purchases. There are plenty of ways to get a few more dollars back on the things you buy every day. Most people already have a cash back credit card. Did you know you could couple that with an app like Ibotta that gives you $0.50 to $2.00 back on the purchase of common items like eggs, paper towels and socks? It may sound small, but the daily savings add up.”
“I prefer a high-yield savings account when I’m saving up for my next car. Certificates of deposit (CDs) aren’t liquid enough for me as you never know when a vehicle will die, and—at least at this moment in time—the interest rates aren’t competitive enough for me to freeze my money. Online-only financial institutions tend to offer amazing rates on high-yield savings accounts. The money is liquid, and earns more than it would in a traditional savings account.”
“The best ways to save money for your car rely on automation and inconvenience. Automate savings: Have some of your paycheck automatically deposited in a savings account. Save your money in an inconvenient place: Choose an online-only bank. If you want access to your money for non-goal related spending, you’ll have to wait 24 hours for your savings to be transferred to your regular bank. This will stop impulse spending. Also, online-only bank give better interest rates, because they don’t have as many physical locations, so less overhead. That savings is often passed on to customers.”
“I believe in buying a vehicle that appropriately reflects what I am able to afford. It seems like people often mix up ‘reliable’ with ‘nice’ or ‘expensive’ so they opt for a vehicle with no shelf life. After five years of debt-free living, our 13-year-old Caravan and 15-year-old Elantra only require occasional maintenance which we save for in advance. Now that we’ve been blessed with some increase in our income, and understanding that eventually these vehicles will break down, we’re discussing the idea of replacing one of them in the next year for something slightly newer. We’ll pay in cash, so we plan to start saving now. It’ll take time, but the more you practice restraint for something that’s truly important, the easier and more rewarding it is to wait.”
“My tip is to always search for the best deals. Be constantly updated on what’s going on in the industry and save as much money as you can. Cashback sites are great to save money. You get coupons for the products you would already buy and earn part of this money back.”
“If you have good credit, you might want to consider not saving for a car. We financed our two cars at very low rates and will continue to do it for our next cars. If your credit isn’t ideal, then you might want to set up an automatic monthly transfer from your main banking account to a separate ‘car savings’ bank account. Even $100 a month can make a big difference after a year or two.”
If you already own a car and want to save money, consider refinancing. You could be eligible for a lower interest rate and/or longer repayment term, which could lower your monthly car payment. Stay current with the LendingClub blog to learn more about car ownership—we cover financing, maintenance and everything in between.
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