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Tips for Saving for a Car

Whatever the reasons, considering purchasing another vehicle can bring about numerous questions including how to afford this type of purchase. Many car shoppers experience sticker stock when they peruse prices. The average cost of a new vehicle is at historic highs, according to research from Kelley Blue Book. Used car prices are on the rise, as well. Fortunately, there are ways to save money and streamline your budget while you're saving up for a car.

A stack of quarters on top of a budget paper next to a toy car and calculator.

Set a Realistic Price Range

Determine how much you want to spend, then research car makes and models to create a realistic picture of available vehicles. Once you've got a target price range in view, calculate payment options using different possible down payments.

As a general rule, you'll want to put at least 20 percent down on a new car, and 10 percent down on a used car. However, the larger the down payment you can come up with, the better. A larger down payment may help you qualify for better loan terms and means your monthly car loan payment will be lower.

Take some time to compare financing pricing and terms across several lenders, as they may vary greatly. And don't forget to include sales tax and fees in the total cost of the car.

Having these numbers lined up will help you determine how much you need to save.

Create a Budget

Help yourself save by creating a budget that you can live with. Take a look at your monthly income, then add in your financial obligations, such as housing, utilities and loan payments.

Track your expenses and other spending habits. This includes groceries, medications, cleaning supplies, clothing, and other expenditures. Finally, think about the other costs associated with owning a car, such as regular maintenance, fuel, insurance and repairs.

Next, separate your spending into "needs" and "wants." For instance, paying your rent is a necessary expense, but buying a gourmet coffee each morning is an extra. These categories make it easy to determine where you can cut back.

Automate Savings

Open a savings account that's separate from your main checking account. This extra step of separation may help you refrain from dipping into your car savings.

Next, set up an automatic transfer into this account every time you get paid. Not only will this make saving easier, but you'll also be able to clearly track your progress as your account balance grows.

Find Extra Work

If you're determined to get that car sooner rather than later, consider taking on side work. If you have the time, spend a few hours a week as a virtual assistant, making grocery deliveries, or selling things online.

Put this extra income toward the down payment on your future car and watch your savings account grow.

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