A Guide to Saving for a New Car

What You Need to Know

1. Set yourself a target, taking into account the actual cost of the car you want, as well as associated costs such as car insurance and road tax.
2. Work out how much you can feasibly set aside each month to reach your target. Now do all you can to stick to this budget each month.
3. Paying a lump sum into a savings account by direct debit means you won’t be tempted to spend the money you should be putting to one side.
4. As well as saving large lump sums, making small sacrifices can all add up. Taking a packed lunch to work or wearing an extra layer instead of turning up the heating are good ways of making small savings.
5. Keeping a picture of the car you want in your wallet can be a good way of ensuring your money saving efforts stay on track.
6. Try and carry on saving even after you’ve hit your target; this way you should have no problem dealing with repair bills or having to renew your car insurance.
7. It may make more economic sense to take out a car loan, so consider borrowing instead of saving.

Set Yourself a Target

Before you can get saving, you need to set yourself a target, so sit down with a pen, some paper and a calculator and work out how much you’ll need for that new car. Ask yourself, do you plan on buying a car outright or would you rather just save enough to put down a deposit and pay the rest on credit? If you do opt to go for a car loan, then it’s well worth saving up enough to pay 20 per cent up front and to also have enough set aside to cope with any unforeseen cash flow problems.

As well as the actual cost of the car itself, now is a good time to budget for associated costs. For instance, you’ll need to pay car insurance and road tax as soon as you take receipt of your new vehicle, so you should add this to the budget. Additionally, bear in mind that, if you plan on buying a new car 12 or 24 months into the future, then prices might have gone up by then.

Set Out Your Savings Plan

With your target in place, it’s time to draw up a savings plan. Firstly, take a look at your monthly budget and see how much you can feasibly put aside each month. Now, you can use this to set an end target for your savings efforts. So, for example, if you will need £5,000 for a new car and can save £500 a month, then you will need to stick to your savings plan for ten months – though again, it’s advisable to put a little more to one side to deal with any unforeseen circumstances.

With this in place, it’s now time to shop around for the best savings vehicle for you. Don’t just stick with your existing bank but instead compare the rates on offer through various savings accounts, including online accounts, though note that some will not allow you to take any money out for a fixed period.

Simple Savings Tips

As well as putting a lump sum into a savings vehicle each month – ideally by direct debit so, in theory, you won’t miss it – you may also want to make smaller steps towards achieving your end goal. Fortunately there are dozens of websites offering money saving tips ranging from selling unwanted possessions through online auction sites to taking a part-time job. Work out what works best for you and above all try and resist the many temptations that may come your way.

Other Considerations

Even though you may want to save up for a car and thereby avoid getting into debt, you should still at least entertain the possibility of taking out a special car loan – though try and avoid the often exorbitant credit packages offered by dealerships.

Indeed, it may be the case that taking out a loan could actually save you money. For instance, it might allow you to drive to work instead of having to buy expensive train tickets, with this more than offsetting any interest you may have to pay. Again, you should do your sums and take into account all the various options open to you before you start saving in earnest.

Carry on Saving

Even once you’ve hit your target, it’s still a good idea to carry on putting some money aside each month for at least a little while. Not only is this a healthy habit to get into, but it can also guard you against any future car-related economic shocks such as renewing your insurance policy, filling up the tank or paying for emergency repairs.

Further Reading

• Check out the This is Money website for sensible money saving tips:
• Instead of saving, consider taking out a loan for a new car. Let UK Net Guide help find the best unsecured loan for you.
• There’s no point making savings if end up spending it on the wrong car. Read our guide to test driving a car to make sure you choose wisely.

1 comments

melaniestomblin
24/12/2011

For public looking for a used car to buy, the majority would probably go about hunting for one by visiting car dealers. Not only is this time overwhelming, bearing in mind the time it takes for you to tour from one car dealer to the next, it also concerned too much hassles having to deal with salespeople. Well, I don’t recognize about you but I undoubtedly do not like the idea of salespeople trying to modify your belief on certain cars or converse you into something you are not fascinated in. Searching for a used car sales online absolutely beats doing it the usual way.

 

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