When buying a car, you might spend hours researching different makes, models, dealerships, and even colours of your potential vehicle.
But if you plan to borrow money to buy your car, it’s also extremely important that you pay attention to your financing options and how much you will need to save to ensure you’re making a financially sound decision.
Here are a few tips towards saving your down payment:
Determine How Much You Can Afford
The first thing you should do is determine whether you can comfortably take on a new loan now or need to save more for a down payment. Saving can also reduce the amount you need to borrow for a car. If you have the financial stability to get a car loan, determine how much you are willing to spend on the car, based on how much you can afford to pay each month.
Calculate Your Down Payment
Choose a target amount to spend, then compare a few makes and models to find out if it’s realistic. Once you zero in on the price range for a car you can afford, calculate your down payment. Aim to put 20 per cent down on a new vehicle and 10 per cent down on a used vehicle.
Budget for car-related expenses
Keep in mind that your car payment and other ongoing costs, such as insurance, will become a part of your budget. Many experts say that all car-related expenses shouldn’t exceed 20 per cent of your take-home pay.
Limit unnecessary spending
As you save up for a major purchase like an automobile, spend money carefully elsewhere. Consider cutting down on “wants” spending temporarily and find ways to reduce your current expenses, such as cable and groceries. Redirect the money saved toward your new car fund.
Set up a savings account
Now that you know how much to save and how to save it, the next step is to find a safe home for your money. It might be worth opening a separate account, so you aren’t tempted to dip into your car savings for other purposes. Watch this video to learn more about the benefits of having a bank account.
Automate your savings
Once you have a place to store your savings, make regular contributions. You can do this with minimal effort by setting up automatic transfers with the help of your bank.
When you’ve successfully saved for your car contact a JN Bank representative, who will skillfully walk you through the financing process.