How to Save for a New Car
Car shoppers are repeatedly checking the prices of new and used vehicles, and each time they get hit by sticker shock. In late August, Reuters reported auto industry consultants J.D. Power and LMC Automotive expect the average transaction prices of new cars for the month to reach a record $46,259, an 11.5 percent increase from the previous year. Automotive research firm Edmunds reported while the average price of a used vehicle has fallen for four months in a row to below $29,300 in July, prices are still extremely high.
To lower the cost of a car purchase with monthly payments they can afford, buyers should be prepared to save for a substantial down payment which according to financial experts would typically be 10 percent for used and at least 20 percent for new vehicles.
Kelley Blue Book and other sources suggest the following strategies that can help car buyers save enough money to purchase their dream car:
1. Maintain Good Credit
A good credit score increases your chances of getting a better interest rate and terms on a car loan. It also helps bolster your credibility with car dealerships, banks and credit unions. To build good credit, always pay your credit card and other bills on time. Limit your debt. Pay off your credit card balances in full each month. Never go over your credit card limits.
2. Cut Expenses
Stay on a strict budget and cut unnecessary expenses by eating out less and cooking more meals at home. Shop for food and other items that you “need” and not “want.” When considering whether to buy an item, a good strategy is to ask yourself, “Is this something I really need, or is it something I just want?” Set aside money or better yet, dedicate a separate bank account for a car fund.
Below KBB shares how your savings can add up quickly depending on how much money you set aside each week:
- Save $25/week = $1,300 year
- Save $50/week = $2,600 year
- Save $100/week = $5,200 year
3. Get a Second Job
Get a second job or sideline in order to accumulate more income. Search the internet for part-time online jobs. Many retailers and restaurants need part-time and fulltime workers in the summer and holiday season.
4. Sell Items You Don’t Need
Clear your house of furniture, clothes and household items you don’t need and have a garage sale or sell these items on Craigslist, eBay and other online sites.
5. Stick to Your Goal
It is never too early or too late to save. Don’t lose sight of your goal. Stay disciplined, focused, and diligent in employing these savings strategies. You may reach your goal sooner than you would expect.
When in the market for a used car, stop by Carousel Preowned. CarouselPreowned serving Iowa City, Cedar Rapids, Davenport, North Liberty, Marion, and Coralville, IA, is proud to be an automotive leader in our community. We do our best to ensure your complete satisfaction every time you step into our car dealership. This is why we offer the widest selection of used and pre-owned cars, trucks, and SUVs and provide true ease of purchase in Iowa.