Saving Money

How much should you save before
buying your next car?

How much should you save before buying your next car?

Buying a car is a big decision because not only is it an important investment, it's something that most people will be driving in for years down the road. There are a lot of elements to factor in when choosing the right car for you, and one thing that should be on the top of that list is how much you should save. So when you just can't get your mind off buying a new car, there is only one thing you can do: make a plan. Here are a few tips on how much you should save before investing in your new ride.

What are your monthly bills?

If you don't already have a budget, the first thing you need to do is get one. Write down all of your monthly bills to see what your outgoing number is. Then subtract that from your incoming numbers to get the total that you can freely spend. There may be some areas that you can wiggle the numbers in your favor. Be careful when you do this, though. You don't want to get stuck with a payment that looked good on paper, but doesn't work well in your daily life.

Be sure you also factor in the expenses that come with owning a car. Have you factored in the insurance and routine maintenance? Also, while we would love to rely on gas prices being low, that just isn't always the case. Factor in how much you drive in an average month and how much fuel will cost.

What is your credit score?

You should know your credit score before you start saving for a car so you have a better idea of what kind of deal you'll get. Often interest rates will reflect your credit history and how diligently (or not so diligently) you pay your bills. Don't get discouraged if you don't have a great credit score, though. Talk to the representative at your local car dealership about what your options are. You might be surprised that they can help you find a great car, and help you improve your credit score by making on-time payments.

What kind of car do really need?

You need to know what kind of car you want and what you honestly need it for. Sure, we all want to look snazzy in our new car, but maybe we don't need that red Camaro just to get back and forth from work every day. Make a list of all of the features and styles of cars that would suit you. If you have your heart set on a particular make and model, then you might have to save a little longer than if you got a practical car for everyday trips to work and to run errands.

What's your next move?

Now that you have gathered the necessary information you can start to work towards saving for your down payment. General rule of thumb is to put down at least 20%, but everyone is different. Apply all of the information above to what you can afford, and what features you can do without. However, once your plan is on paper you might surprise yourself and find that you can afford an even more luxurious car than you thought possible.

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