When my 15-year-old Toyota Camry was kicking the bucket, I needed to find out how to save up money for a car. But how was I supposed to do this as a college student surviving on Spaghettios? Already in student research mode, I began googling money-saving techniques. I then came up with some strategies that saved me thousands. Thank goodness, because I needed more cash to buy cases of Spaghettios. If your vehicle is on its last leg, check out these eight tips on how to save up money for a car.
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1. Keep paying your old car payment amount
Unless you’re saving up for your very first vehicle, or already paid your old car off, you most likely have a car payment. You’re probably used to this money getting sucked out of your account faster than you can drink a Slurpee. Instead of reveling in cash when you pay off your car, continue to put the car payment amount into a designated savings account. I know, it takes discipline.
But if your car still works a few years after you pay it off, you’ll save thousands of dollars. And you’ll be in good financial shape when your vehicle dies. You also won’t be scrambling for a down payment on a new car that you wouldn’t have had otherwise.
2. Set up auto deductions from your paycheck
If you’re freaking out about how to save money for a car, automatic deductions will ease your anxieties. Think of automatic deductions in the same way as when your employer takes out taxes from your paycheck. In both instances, the money disappears, so you can’t see it. For me, if I don’t see the money, then I won’t spend it on more shoes (and I love shoes). So set up an automatic savings account that takes deductions from your paycheck. Then you won’t be tempted to spend the savings on all 15 seasons of Grey’s Anatomy.
Okay, that’s me talking again, but you get the point. The process is so simple that your grandma who hates technology can do it. Ask your employer for an automatic withdrawal sheet. Most companies have these for your convenience, but if they don’t, you can set up automatic payments through most banks online. Start out small – with something like $50 every paycheck, and the savings will add up over time. I appreciated this technique when my old Camry died in the car dealership parking lot, and I needed a new vehicle ASAP. No joke!
If I hadn’t researched how to save up money for a car, I wouldn’t have had a substantial down payment for my spanking new Kia Soul that got me home.
3. Stow away your tax refund
Many people receive a tax refund at the end of the year in the form of a check or an automatic deposit to their account. The amount ranges from a few hundred to thousands of dollars. Often the average family does not budget their tax refund into their monthly budget. So why not take that money and put it into your car savings account? Don’t even touch it. Just stow all those Benjamins out of reach for a while, or try to put half of each payment into savings. The money will pile up if you stash the tax return and don’t look back. Well, until your car windows are all covered with cardboard, the muffler is hanging on by a thread, and it’s time to buy a new car.
4. Reduce spending elsewhere
Another way to save for a new car is to reduce spending elsewhere. You can begin doing this at any time – especially if your family minivan is missing more parts than you can count. Sound familiar? Then it might be a good time to cut down on unnecessary costs. You and your partner should discuss what expenses are necessary and what expenses are not. You might have to spend less money on your Star Wars memorabilia, but the sacrifice will be worth it. Try to nail down a firm budget and plan how to save up money for a car. There are many ways to cut costs that you can consider.
For example, my husband and I rarely eat out. Our idea of a nice meal on the town consists of the dollar menu at McDonald’s. We’re okay with this because we have one car that’s running out of time. We also took a financial-saving leap by cutting the cable. Getting rid of our TV package was a difficult decision. Even more so for my sports-obsessed husband. We got creative and bought the Fire TV and downloaded free apps to access some shows. Do we have all of the same channels as we did when we paid for cable? No, but we won’t be missing the latest episode of The Bachelor when our car no longer works, and we need a new one.
Can you believe that we save approximately $100 a month by changing how we watch TV? This extra money goes straight into that car savings account. Thank goodness, considering it’s deathly humid here in Florida, and the air conditioning in my husband’s car stopped working. Did I mention his windows are jamming too? It turns out that we might be digging into that car savings account sooner than later.
5. Aim to save at least 20% for a down payment
Most people cannot strut into a car dealership with 30,000 plus dollars of cash and then walk out interest-free. In today’s world, that’s a rare occurrence. So you should do your best and try to save for at least 20% of a car payment. The more money you can put down, the less interest you will pay. Many buyers look for the lowest monthly payment but don’t consider the long-term interest. It all adds up, and no matter how you break up payments, less money overall remains the better option.
If you can’t swing 20% or think you can afford a higher percentage, check out this down payment calculator from cars.com that can help you out.
6. Trade in your old car, or better yet, sell it before you get a new one
When I knew my used beat-up Toyota Camry had seen its day, I tried to sell it. Don’t worry; I let potential buyers know about the automatic windows not working, weird sounds, and missing parts. I was completely upfront but thought someone could put some love into it. Understandably, no one bit. If your car is in better condition, you usually can get more money selling it on your own than trading it in. Unfortunately, that wasn’t an option for me and my banged up Toyota Camry that died in the dealership parking lot. I did trade it in for a grand, so I got a few bucks towards the new car and skipped paying for a tow. Score!
Another step when planning how to save up money for a car is to take advantage of this time and declutter.
Do you have a ton of baby clothes, and now your kids are in high school?
Are your kitchen cabinets overflowing?
Do you have enough paintings to fill up a small art gallery?
Is your furniture still from the 70s?
Now is the time to host that tag sale you’ve always been talking about. Gather up those items that you don’t need, price them, and put them outside. My husband and I hosted a tag sale when we were moving from New Hampshire to Florida, and we raised $2,000! We had only lived there for four years. Yes, we got rid of a couch for 60 bucks, and it probably was worth $300, but we didn’t have to pay for a U-Haul to Florida, and we earned some quick cash.
You also should check out declutter.com if you have a lot of video games and CDs that you no longer use. I love this site! I recently rummaged through my old CD and video game cabinet. Then I dusted off some games we no longer played, scanned their barcodes on my phone, sent them in, and received a $100 check in return.
Again, they were worth more, but the time I saved, and the convenience of this site, allowed me to get some cash quickly.
8. Renegotiate your bills
I have saved a lot of money by calling companies and asking if there’s a better deal. I did this with my car insurance yesterday. And if you successfully renegotiate your bills, you’ll have more money to save up for a car. All you have to do is call and ask if there are any deals, promotions, or express your interest in a different company. The only issue is that negotiating is not my favorite thing to do, and I’m a busy mom.
That’s why I recently signed up for Trim, an online assistant that does the negotiating for you. And it’s easy! Create an account online then Trim analyzes your bills. Once they discover a better deal, they’ll let you know. This company is going to give me hours of my life back, so I can actually fold some laundry instead of only washing it (shhh). So if your vehicle starts making strange noises and has the same birthday as your grandpa, don’t freak out. There are many ways to save for a new car that won’t make you look older than you already are.
Hopefully, your car isn’t in as rough shape as my Camry was. But no matter what the condition of your vehicle, anything can happen. And you need to prepare for when you have to buy another car.
I hope these tips on how to save money for a car will help you out and have you driving around in style soon.