5 Money Saving Strategies for Buying a Car

If you're like most people, the thought of buying a new car can be overwhelming and stressful. You may feel you don't have enough money to buy a new vehicle, or you may not know where to start looking for a good deal on your next car. Even worse, you may think you'll never find a great deal considering that car prices continue to skyrocket due to high inflation. 

But nothing could be further from the truth. It only takes an effective money-saving strategy to get you started in finding a great deal on your next car purchase. This article will discuss five proven ways to save money when buying a car. So, let's begin!

1) Determine Whether You're Financing, Leasing, or Paying Cash

The first step is determining whether you are financing, leasing, or paying cash for your next vehicle. Each option attracts a fair share of pros and cons. For example, if you finance your car, you pay monthly interest, which can add up over time. On the other hand, if you lease your vehicle, you'll make a predetermined upfront payment, plus monthly payments, and you'll get to use the car until the end of the lease period but unlike the first example, you have no car that belongs to you at the end of the lease period.. The final option is to pay cash for your vehicle. This method requires you to put down a significant amount of money upfront. However, it does allow you to avoid incurring any monthly payments.

Of course, there are many factors to consider before deciding how you want to afford your next car. Here are a few money-saving strategies relevant to the above options:

• Calculate your down payment. How much do you plan to spend given your dream car's make or model? After determining the price range for the vehicle you can afford, you want to calculate the down payment. Generally, you should aim for a 20% down payment on a new car and 10% on a used one.
  
  
• Consider your credit score. Your credit score plays a significant role in determining the terms of your auto loan. A low credit score means higher rates and more expensive loans. However, even with a bad credit history, you can still qualify for a loan by using a personal guarantor also known as a co-signer.
  
  
• Consider your insurance needs. Do you need collision coverage or comprehensive coverage? These types of policies cover damage caused by accidents as well as theft. They also protect against damages such as fire, vandalism, and hail. Collision coverage costs around $500 annually, while comprehensive coverage costs around $2,000 annually. When getting a loan for a car most financial institutions will require full collision and comprehensive coverage on the vehicle you are purchasing.

2) Budget for Expenses Related to Owning a Car

Have you heard of the 50/30/20 budget? Many experts recommend keeping at least 50% of your income aside for your primary needs, 30% for wants or personal desires, and 20% for savings and debt repayment. That means the latter should also cover your car-related expenses like gas and insurance. If not, you may have to cut back on some of these expenses.

Here are a few tricks that can help you stay within your budget:

• Compare car insurance rates. Before making a purchase decision, inquire from multiple insurers about their prices. Most car owners often pay more than necessary because they don't shop around. Ask about discounts-you may be surprised what qualifiers count for a discount.
  
  
• Consider bundling your auto insurance with other policies. You can save money when you bundle your homeowners and auto insurance together. In addition, most companies will give you a discount if you buy both policies through them.

3) Set Your Goal and Timeline

Once you've decided on your dream car and its price range, it's time to determine how and when you want to purchase the ride by setting your saving goals and timeline.

Start planning for how much you need to save so that you can purchase the car you want while at the same time not burdening yourself with spending more than you’re comfortable with. If you know that you need to put $10,000 down for the car you want at the monthly price you're comfortable with, incorporate that into your budget and establish how long it will take for you to get there. It helps to see where you’re headed by breaking your savings down by monthly, weekly, and even daily goals. Your future self will be very happy you did!

You'll also need to consider the length of your loan term. If you choose a shorter loan term, you'll pay less interest. But, you'll also pay off the loan faster. On the flip side, longer loan terms mean lower payments but more interest paid over the life of the loan.

4) Automate Your Savings

If you're serious about saving money, you'll need to automate your savings. This is where online banking can come in handy. Many digital banking platforms allow the automatic transfer of funds between accounts.

Automating your savings makes it easier to stick to your budget since you won't have to think about transferring funds between accounts. It also helps you avoid spending too much money on things that aren't essential.

5) Sell or Trade In Your Existing Car

If you already own a vehicle, you can sell or trade it in to get cash for your next car. Selling your current vehicle could be an excellent way to fund your next one. However, ensure you do your research before putting your existing vehicle on the market. There are many factors to consider, including market value, condition, mileage, and age.

Speaking of market value, you can use appraisal tools to estimate your car's worth. That way, you can rest easy knowing how much you'll need to add to your savings fund to afford a new car. 

Trading in a vehicle can also be worthwhile to help pay for your new vehicle but, it will usually give you less money in return than selling it yourself..

Set Up a Goals Account with mph.bank Today!

So what are you waiting for? Start your application with mph.bank today and create your dream car goals account to start automating savings towards that goal!