Saving for a New Car
How to budget and save on the costs of buying a new car
With the average price of a new car consistently on the rise, it takes planning and discipline to save for this major purchase. If you take the time to save for a new car, you can open up your buying options and reduce last minute stress.
Why you should start saving for a new car
For most people, the goal of saving for a new car doesn't have to involve saving enough to cover the entire purchase price. Instead, the real goal is to save an amount sufficient for a significant down payment, which will reduce the monthly payments to a more reasonable level.
How much is enough when saving money for a car? Naturally, that depends on your overall financial situation, the kind of car you hope to buy and your desired payments. But let's try one scenario as an example. Assuming a 5% interest rate, if you put $7,000 down you can reduce your 6-year loan payments on that $28,000 automobile purchase from $450 to $338 per month. By putting just $300 a month (or $10 a day) into a savings account, you can save enough for that initial down payment in just under two years.
The other costs of buying a new car
Besides the down payment, which can be optional, there are other costs associated with buying a new car you should begin to save for. On the day of your purchase, you should be prepared to pay up front for documentation fees, title and registration, and sales tax.
How to save for a new car
Your personal plan to start saving for a new car will be determined by your car use habits. If you typically purchase a car and keep it until you absolutely need a new one, you have a bit more time in between vehicle purchases to save for the next. But, if you are a driver who likes a new car every few years, you should always be putting a -portion into your savings to prepare for your next purchase.
Keep your car buying cycle in mind and designate a comfortable amount to put into savings each month.High interest savings accounts can provide you with income from interest and also enable you to use the money in your savings account as needed. You can also aim for a higher interest yield by investing your savings into a money market account or certificates of deposit. If you are beginning your savings well in advance of making your car purchase, you could also put together a savings portfolio that combines the benefits of each of these accounts.
Finding the best deal
Once you've chosen your ideal models, you can begin scanning online car databases for price, features and availability. Also check your local newspaper, either the print or online version, to see what dealers in your area are offering. Once you've found a handful of cars in your area that look interesting, it's time to visit the lot for a closer look, a test drive and perhaps some haggling with the salesperson over price.
Save for a new car with Citizens Bank
Citizens Bank can help you save for a new car with flexible savings products from secure certificates of deposit to convenient money market accounts. For more information, call to speak with a Citizens Bank customer care representative at 1-877-360-2472.