Saving for a car can take planning and adjusting your spending habits. Whether you’re shopping for a new car or an older model, developing a strategy to save money for a car down payment will benefit you and your budget.
why save for a car instead of relying entirely on a loan?
Your future car is a depreciating asset: its value drops by 10% as soon as you drive it off the dealership, yet what you owe on the car (your liability) remains the same. By paying more of your car down payment up front, you can lower your car loan amount and lower your monthly car payments.
Reading: Best ways to save money for a car
Paying a down payment makes your car loan smaller and will mean lower monthly car payments in the future, including lower interest charges over the life of the loan.
how to save for a car
choose a car and see how down payments affect monthly payments
First, research the cars you like and highlight a few models that advertise financing options that fit your monthly budget. Use our auto loan calculator to enter the total cost of cars in your price range to see monthly payment options (which will depend on the length of the loan and your credit score range). now change the price of the car by subtracting what you think you can raise for the down payment. How do the monthly payments compare with and without your down payment?
start a car savings fund with auto savings
With a number in mind for your down payment, you can create an auto savings fund to help you manage the money you save and track your progress toward your down payment goal.
To save money and get closer to your goal, increase the amount you save each week and lower your spending. By automating a minimum payment to your savings account with each paycheck, you eliminate the temptation to spend elsewhere, and you can also know exactly when you’ll reach your goal.
An easy way to generate automated saves to achieve a goal is with chase autosave. With easy ways to regularly move money from a Chase checking account to a Chase savings account, AutoSave also lets you set goals for your savings. Applying a car down payment goal can keep you focused on your new car, while auto-saving ensures your budget remembers your most important goals.
consider additional expenses
Remember that the car you buy will come with sales tax and fees, and will have up-front costs for insurance payments, maintenance, and gas money. Take these additional costs into account when calculating how much you need to save for this big purchase.
the best ways to save for a car
budgeting and cutting costs
sticking to a monthly budget will help you save for a car more quickly. keep track of your expenses and income, and create a plan to improve your spending habits each month. The 50/30/20 rule is a popular budgeting method to follow and is to spend 50% of your monthly income on essential items, spend 30% on non-essential items, and designate 20% for savings.
You can cut back on non-essential items like entertainment, dining out, and monthly subscriptions, and put this extra money into your car savings fund.
You can start saving money automatically with chase autosave. automatic savings lets you set goals for how much you want to save over a period of time and automatically transfer money from your chase checking account to your chase savings account. If you decide you want to save $40 each week, you can set up auto-save to roll that amount into your savings on a weekly basis. You can also choose to transfer a portion of each deposit you receive to your savings account.
trade in or sell your old car
Depending on the value of your current car, the trade-in money you receive can significantly reduce the cost of your new car. Trading in your car is an easy method of getting cash for your new car. Selling your car may make you more money, but it could take more time and cost more effort.
get an extra job
In addition to your full-time job, a side job will give you some extra money to add to your car savings fund. you could work as a freelance writer, sell your books, games, or other unwanted items online, babysit, shop, carpool, or be a virtual assistant to earn the extra money for your new trip.
the bottom line: buy a car that fits your budget and schedule
You should choose the car you want based on what you can afford, your schedule, and your preferences. If you want a new car, you may need to develop a long-term plan to save up for it. And if you have an immediate need for a car, you need to adjust your plan and budget. By finding ways to save money and carefully tracking your spending, you can save enough to make your new car payments affordable.
This material is provided for informational purposes only and is not intended to be personal advice or an offer of credit.
See also: Liability Car Insurance