Saving For and Buying a Car

Everyone needs a way to get around. Right now, many Americans live in spread-out areas like suburbs, where having a car is a must. Owning a car offers you the choice to go anywhere you need, at any time. However, a car is not a small investment and may be one of your first expensive purchases. It is important to have a good plan to save for and buy one.

Have a savings plan

Pick an amount to save with each paycheck, and stick with it (for example: $100, $150). This will make your goal more of a reality. It will help you determine how many paychecks are needed to reach it. You should consider when you'll need the car, so you can choose how much to save every payday and when to start.

Savings accounts are the best option when it comes to wanting to save money and not spend it. Many banks even offer online savings tools to help you get in the habit. Keep in mind, saving shouldn't give you stress. If you're getting stressed over the amount you set aside, maybe try to lower the amount you are putting away. Whatever you do, just don't abandon your plan. If you plan to save a set amount with each paycheck, stick to it. Don't skip a single paycheck! This will help ensure you have enough saved by the time you plan to purchase your car.

Decide what car you want

You should always try to pick the right car for you. First, what will you be using it for? For example, do you want something that will get you back and forth from work or school? Do you need something that will take you longer distances? How much storage space will you need? Do you need to be able to carry a lot of passengers or items? Second, how important is gas mileage to you?

Consider if a new or used car is right for you. While a new car may be more reliable than a used one, it comes with a higher cost. On the flip side, a used car is usually cheaper, but it may end up needing more repairs compared to a new one. You will need to look at the pros and cons of each type to decide.

Loans

If you have been saving enough to afford the car, you can pay for it upfront. By doing this you will stay out of debt and won't have to worry about making car payments. If you don't have enough money to pay for a car, you can apply for a car loan. When you're trying to get a loan, be sure to look at different lenders to compare their terms.

Next, decide how you want to spread out your payments. You can either take a long-term loan out with small monthly payments or a shorter loan with bigger payments. Remember that having the lowest possible payments isn't always a good thing because you'll owe interest on each payment. The more payments you make, the more interest you owe, which means you're paying more in the long run. However, smaller payments are more affordable. Overall, the payment amount selected should be one you can afford without taking on too much interest.

When you take out a car loan you will able to use your savings as a down payment to buy a car. The down payment amount may vary depending on the car and your credit score. The more money you put down, the less money you will need to borrow to purchase your car. By getting a car loan, you are helping build your credit with monthly payments.

Consider the "true" cost

The cost of buying and owning a car is much more than the tag price. It includes all related costs such as gas, repairs, and maintenance. To give you an idea, car payments alone can run you a few hundred dollars a month.

Extra items like satellite radio or a sunroof increase the price. You should decide if you really need those things before you start shopping.

You should know that once you buy a car, it'll take a few more fees before it's road-ready. Before you can legally use public roads, you'll need to register your car with Illinois to get a license plate. You'll need a title, which establishes you as the legal owner. Registration can also run you a few hundred dollars. You'll usually do this at the DMV, but in some states, you can get it done at the dealership. If you do this, you'll have to pay extra fees called documentation fees.

Also, you'll need to get car insurance on your new ride before driving it. On August 18, 2017, Illinois updated the vehicle code to strengthen mandatory insurance requirements. This means it's against the law to operate a car in this state without insurance.3

By considering all these factors, you can save a great deal of money when purchasing a car.

Sources

1https://www.usatoday.com/story/money/personalfinance/2014/09/01/saving-new-car/14804239/

2https://cars.usnews.com/cars-trucks/what-to-do-after-you-buy-a-car

3http://www.ilga.gov/legislation/BillStatus.asp?DocNum=3874&GAID=14&DocTypeID=HB&LegId=105860&SessionID=91&GA=100