It’s time to take the wheel of your finances and save up for a major purchase: buying a car. This week, the Pangea Pros are here to help you buckle down with a savings plan and share helpful resources that’ll stop you from spinning your wheels in place. Whether you’re buying new, used, or trading in, these tips will help you make smarter decisions.
Narrow Your Choices
So, you’ve got an approximate amount of money you want to spend. The first step is figuring out which cars realistically fall into your budget range and serve your needs. We’d all love that new red Italian sports car, but have you tried getting all your groceries in the back? It’s a nightmare.
Looking at your options is the fun part of the process. Consider the year, make, type, features, and mileage to determine the price range and vehicle type you should target. For example, if you mostly use your car for daily commuting, fuel efficiency and reliability might be things you think about in your decision-making process. If you have a family, spaciousness and safety might be top-of-mind.
Consumer Reports is a useful resource for unbiased car reviews, ratings, and ownership stories that can help you through this process. Who better to hear from than families just like yours who have owned a similar car? Since their data comes from thousands of car owners who share their experiences and opinions, you can get a real-world perspective on factors like features, reliability, maintenance costs, and common issues.
The Kelley Blue Book is another smart tool that can be used for obtaining accurate pricing information for both new and used cars. Using KBB, you can easily compare prices for different vehicles based on their year, make, model and mileage. This information can help you choose a car that fits your budget, yes, but also proves to be cost-effective in the long run—limiting unexpected expenses and repairs.
Determine Your Down Payment
Now that you have a car and general price range in mind, how much will you actually need to hand over to a dealership? Figuring out your down payment is all about finding a balance. While a 20% down payment is often recommended, it’s not a strict rule. Experts recommend aiming for a down payment between 10% and 20% of the car’s purchase price – this can help reduce your loan amount, lower monthly payments, and might even qualify you for better interest rates.
Start Saving
When it comes to being thrifty with a new car in mind, reworking your budget and savings strategy is a good place to start.
Cut back on your unnecessary expenses and try to put at least 20% of your paycheck into savings every month.
Automating your savings accounts can make it easier to stay on track. While saving, it can also be helpful to consider higher-yield options. Explore high-yield savings accounts, checking accounts, or certificates of deposit (CDs) that offer better returns than traditional bank accounts. By growing your savings through these options, you can potentially reach your car savings goals at or above the anticipated speed limit.
Don’t forget the significance of your credit score. Good credit can open doors to better loan deals. Focus on paying your bills on time, keeping a low credit utilization, and checking in on your credit report for any errors. Experian Boost is an easy way to boost your credit history by adding positive payment history, improving your overall creditworthiness.
Assess the Value of Your Current Car
If you’re considering selling or trading in your current car to help finance your new purchase, you have two primary options: selling privately or trading it in at a dealership. Each option has its perks and drawbacks.
Selling privately typically allows you to get a higher price for your vehicle compared to a dealership trade-in. On the downside, selling directly to a new owner will take more effort on your part, from advertising, negotiating with potential buyers, and handling paperwork. You may also need to invest time and money in preparing your car for sale, taking care of any cosmetic or mechanical issues.
On the other hand, trading in your car at a dealership is convenient and easy. Trading in your car may provide tax advantages, since some states subtract the trade-in value from the purchase price of your new car, reducing the sales tax you owe. Unfortunately, dealerships usually offer less money for trade-ins compared to what you might get through a private sale. At the end of the day, it’s your call to choose the option that makes the most sense when considering your financial goals, time constraints, and personal preferences.
With your dream car in mind and a savings plan in motion, you can be behind the wheel in no time. And with some helpful tips from the Pangea Pros, we’re sure it’ll be a smooth ride. Happy savings!
DISCLAIMER: This material is provided for informational purposes only, and is not intended as personal advice or an offer of credit.
