If you are thinking of buying a new car, you may be wondering how you will pay for it. While we understand that money can get tight, anyone can save for a new vehicle with the right plan in mind. Here are a few practical guidelines to help you afford that new set of wheels.
#1 Calculate Your Payment
Before you accidentally get yourself into a hole of debt, you need to determine how much you can actually spend each month on a car loan. To make things easier on yourself, work with one of our personal loan officers to help set the bar right from the onset. Outside of monthly payments, you also need to decide if you will take out a loan or pay for the car in full. Either way, you will need to start saving now.
If you are buying a car using monthly installments, you will need to calculate your down payment. To get the most accurate estimation, you can work with your loan officer, but if you’d like to get a general idea now, you can start with an online car loan calculator. This will give you a ballpark figure so you can start making the right decisions from the beginning.
Finally, when calculating your savings plan, you need to determine how soon you need the vehicle. According to Auto Trader, you should expect to save around 10% of the overall value of the vehicle for your down payment. The sooner you need the vehicle, the faster you will need to save the down payment. This means you will need to put back a higher percent each month for a car you need in 2 months versus a car you need in 6 months.
#2 Stick To The Plan
Before you dip your toe into the waters of buying a new car, you need to make sure you are in the right mindset for saving properly. Make sure you put back a certain percentage every month, regardless of your current financial situation or spending habits.
Do you really need that new pair of shoes? How many times do you plan on eating out this month? The more you drift off the plan, the longer it will take for you to save for your dream vehicle.
Remember: Saving doesn’t have to be stressful. To make it easier on yourself, you can even set up recurring automatic transfers from your checking account to your savings account on a certain date using your mobile app or online banking. This way, you won’t be mulling over the numbers every chance you get, and saving will become automatic. Now, the real question becomes, how much should you put back?
#3 Don’t forget about insurance, repairs and maintenance
The cost of a car isn’t what you pay to the seller. You’ll also want to make sure you take costs like insurance, repairs, maintenance and even gas into account. Newer cars usually mean fewer repairs, although repairs on newer cars can still be more expensive due to the increasing technology in vehicles.
On the insurance side, it’s going to depend on your driving history, the type of car you buy, where you live and more. Car and Driver reports that the average cost of car insurance in Ohio is $1,037 per year. Keep in mind that this will vary widely, so your insurance agent is the best bet for a more specific number.
Finally, don’t negate what it’ll cost you at the pump. A pickup truck is great for hauling or moving, but it’s also going to be more expensive to fill up. With fluctuating gas prices, make sure you can afford to fill your tank when you need to.
Bonus: Start a “New Car Someday” Fund
Despite your best efforts, your car probably won’t last forever. Even if you aren’t actively looking for a new car, it’s smart to begin putting money away that you’ll be able to use if your old car decides to call it quits. Then, instead of scrambling for money, you’ll have something already saved that could take care of your down payment, or even more.
It’s just one reason having an emergency fund (or savings that you earmark for specific purposes) is a good idea.
When A Plan Comes Together
Are you looking for financing for your new vehicle? Mercer Savings Bank offers competitive rates and personalized service, and a quick process. Visit our auto loan page to learn more and get answers to our top questions.