Cars parked in a parking lot

Tips for Saving Up for a Vehicle

Ways You Can Save Cash for a Car

Are you trying to save up for a car? Don’t know how to start? There are many things to keep in mind when saving up for a car. Here are a few tips to follow.

Happy woman calculating a budget

Calculate your Down Payment and Other Vehicle Costs

If you are looking to purchase a vehicle, you should calculate how much you will need to make that purchase happen. First, determine how much you are willing to put down for a car. Buyers should plan on putting down at least 20%. For example, let’s say you would like to save $4,000 for your down payment. Since $4,000 is 20% of $20,000, the vehicle you purchase should cost $20,000 or less.

You will also need to take into consideration your monthly car payment. The monthly car payment will vary depending on the principal borrowed, interest rate, and length of the loan. Let’s say you went ahead and purchased a $20,000 with $4,000 down. With the remaining $16,000, you borrow with a four-year loan. Over 48 months, you can expect to pay $333.33 plus interest each month for that vehicle. Other costs you will have to consider in your budget include gasoline, insurance, title fee, and registration fees.

[ READ MORE: What is the 20/4/10 Rule for Buying a Car? ]

Trade In Your Vehicle

Whether your current vehicle is a newer model with low mileage or an older one with lots of mileage, the car you drive has value. An easy way of lowering the amount you owe on your next vehicle is to trade in your current ride.

Going back to the example above, let’s say that your vehicle has a trade-in value of $2,500. Instead of having to borrow $16,000, that buyer will only need to borrow $13,500. If they choose to stick with the four-year loan mentioned above, their monthly payment will be lower and they will save some cash in interest over the long run as well.

[ Get a Trade-In Appraisal at U.S. Auto Sales! ]

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Review Your Budget and Make Adjustments

Once you have a goal in mind, it’s time to review your budget. See how much you spend every month and how much you have leftover. Cash that you don’t spend should be put into a savings account that you can pull from once you are ready to make your purchase.

So, what should you do to make adjustments to your budget so you can save more each month? An efficient way of saving money is cutting back on non-essential expenses, such as entertainment, travel, and merchandise. While it’s okay to spend some cash here and there on fun items and experiences, it’s important to limit how much you spend on non-essentials each month. If you find it tough to lower your monthly expenses, consider earning some money on the side, such as selling some unwanted belongings. If you don’t know what your budget is and need to get started, we recommended using the 50/30/20 budget rule.