While you’re looking at cars for sale and getting excited, your bank account is wincing. With the average price of a new car over $53,000 in Canada right now, many consumers are looking for ways to save. Whether it’s looking at used vs new cars or dealerships vs owners, saving for a larger down payment is still worth it.
Luckily, you can start saving today and make car shopping a lot easier. Let’s talk about how to save money to buy a car in 2022!
Why You Should Save Money to Buy a Car
Financing and leasing are options, so why would I want to save money to buy a car? With used car prices at record highs, we’re not suggesting you have to pay for the entire car upfront. If you can, that’s great, but it’s not entirely necessary.
Instead, we’re suggesting paying off as much as possible upfront to save money in the long run. This can reduce your loan payment, save you money on interest, improve your credit score, and help you pay off your loan faster. The more time you have to save before purchasing, the better.
How to Save Money to Buy a Car
Saving money now will directly save you money later. Here are some helpful money-saving tips to help you with buying a car this year!
Create a Timeline
When do you need a new car? If you currently have reliable transportation, try to set as much time in advance as possible. This will help you conduct proper research and maximize your down payment.
From there, you’ll have to find new ways to save money. Reducing expenses or increasing income are the best ways to do this, but you will have to determine the monthly amount you can save to determine your timeline.
Set the Desired Amount
How much do you want to save to buy a car? If you know the price range you want to buy, determine the percentage you want to save. For a 5-year loan, every $1,000 you put down will save you an extra $20 a month.
If that doesn’t sound like much, think about how much easier it will be to pay off your loan quicker. If the loan is $20 cheaper, you can still pay the extra $20 and save a few months off of the term of your loan. Every bit you can pay initially will directly save you money.
Let’s say you want to put down $5,000, and you currently have $2,000 saved up. In that case, planning ahead for an extra $3,000 can take some time and planning. If you need a car 6 months from now, then you’ll need to save $500 a month until then.
From there, create a clear budget. Look at your expenses and find ways to save in the coming months. Also, make sure your monthly budget can handle a new car payment!
Maximize Your Down Payment
If you can save enough for a large down payment, that’s great. However, there are still ways to maximize your down payment that can work out in your favor. For example, trading in your current vehicle can add some extra money to your down payment.
Keep in mind that trade-in values are the lowest, as dealerships want to ensure they can make a profit when taking a used vehicle. If you want to maximize your value, consider selling directly to a buyer and using that money toward your down payment. Some work and a little patience could add thousands to your down payment if done correctly.
Using a revolving line of credit like a credit card to add more to your down payment may make sense. However, that is only if you can pay off that balance soon. Otherwise, you’re simply adding more unnecessary interest to your loan.
Shop Around For the Right Vehicle
Finding the right vehicle at the right dealership is essential. This will save you money on your loan, future repairs, and more. Typically, a car that’s 2-3 years old is the best financial decision, as the bulk of depreciation has already occurred without harming the vehicle quality too much.
However, with used car prices so high, not everybody can afford a car this new. If you need to go older, you will at least have the benefit of reading testimonies from long-term owners. This can help you find the right vehicle.
Also, find a reputable dealership that handles all of the necessary work appropriately. An unreputable dealer may sell you an unreputable car, which could cause you to roll over your new loan onto a new one for another new car.
Alternatively, buying from an owner may give you the best deal, but only if you can afford to pay for it in full. Of course, you can always take out a cash advance or personal loan to pay for the car may make more sense if you can find a good deal. Just do your research on the car and get it inspected by a trusted mechanic before committing to a sale!
Start Saving Today
Now that you know how to save money to buy a car, put these tips to use right away for the best results. We all need access to reliable transportation, but we don’t want to break the bank. The more you save now, the less you’ll worry later!
Stay up to date with our latest financial advice, and don’t hesitate to contact us with any questions or for help with your financial strategy!