Saving for a New Car? 4 Ways to Make Budgeting Simple
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A car is one of the most expensive items that you will purchase in your lifetime. Generally speaking, even an older vehicle with 100,000 miles on it could cost $5,000 or more. Therefore, it is important that you start planning for the cost of owning a vehicle before you actually make the purchase.
Get Credit Approval from a Bank or Credit Union
When a bank approves your application for financing, it will tell you how much you can borrow and what the interest rate on the balance will be. A lender will also specify whether a down payment is required and how much that payment will be. This helps you get a rough idea of how much you can spend and what your monthly payment will be. Typically, the terms that you are quoted are good for 30 to 45 days.
Where Will the Money Come From?
One way to save for a car is to set aside a certain percentage of your paycheck each week until you have enough for a down payment. You could also choose to put a tax refund or yearly bonus check toward the purchase of a car. Other ways to raise money include renting a room in your house, selling belongings or finding freelance work.
Will You Buy from a Dealer or Private Party?
Both private sellers and dealers offer a wide selection of used cars for sale. While buying from a dealer may be more expensive, you can feel good that the vehicles have been inspected and come with a warranty. While private party vehicles are less expensive, there is no guarantee that they will run properly. Therefore, you need to make a choice as to whether you want to spend more on a car payment or potentially spend more on maintenance.
Do You Have Equity in Your Current Vehicle?
If you have positive equity in your current vehicle, it can be used as part of a down payment. In some cases, the trade allowance will be deducted before sales and other taxes are calculated. This means that you will likely pay less for the car than you would if you decided not to trade in your vehicle. If you are thinking about buying a new car, it is important that you have a plan to pay for it. While it may be possible to sell or trade the vehicle in before the loan is paid off, there is no guarantee that you’ll make a deal that is in your best interest.
Emma Sturgis is a freelance writer based out of Boston, MA. She writes most often on health and education. When not writing, she enjoys reading and watching film noir. Say hi on Twitter @EmmaSturgis2
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