Between new and used vehicles, people buy around 57 million cars in the US each year. Some people with really high-paying jobs buy them outright. Others lean in to financing options.
What if you don’t enjoy a high-paying job and don’t relish the idea of taking on a lot of new debt to get a new car? You need a different approach. You must incorporate buying that car into your personal finance plan.
For those with a well-developed monthly budget, this task proves easier. Even those who don’t have a budget yet can still develop a plan for buying a car.
New or Used
The first task on your new quest is for you to decide between a new car or a used car. New cars offer some advantages, such as factory warranties and dealership mechanics. They also come with disadvantages, such as higher price tags and more expensive insurance.
Used cars come cheaper. Plus, you can find used cars that still run great. Yet, you get a vehicle with some mileage that won’t last as long.
For the cost-conscious buyer or someone who needs a new vehicle sooner than later, though, used cars typically win out.
Budgeting
Once you settle on a new or used car, you can generally get a general idea of how much it will cost you for a given kind of car by searching local dealership websites. For more info on pricing, you can find more here. Once you know that, you must examine your finances.
You need a clear sense of how much you make, save, and spend in a given month. The leftover amount is the baseline for what you can put away toward buying a car each month.
Set a Goal
The easiest way you can get from looking at your budget to buying a car is to set a goal for when you want to buy. A goal motivates you to, for example, cut back on splurges.
If you buy lunch three times a week, cut back to once a week. If you subscribe to two streaming video services, cut back to one. Put the money you save toward your car fund.
Create Accountability
Tell someone you trust about your plan. Ask them to check in with you about it once or twice a month. Knowing that someone will ask you about saving for your car will create a little pressure to actually save the money.
Adding a Car into Your Personal Finance Plan
Adding a car into your personal finance plan likely won’t prove easy, but it shouldn’t become unliveable either. Figure out what kind of car you want. Then, do the math with your finances.
Figure out what you can reasonably put away each month and what cost-cutting changes you can live with while you save. Use that final number to set a goal for buying a car. Then, ask someone to help you stay accountable.
Looking for more tips on buying a car or financial tips? Check out the articles in our Business section.