Saving up to buy a car is a big deal — after all, it’s often a multi-thousand dollar purchase. With that in mind, it’s important to choose the right vehicle that fits your needs, so you don’t end up with something that’s not practical. In addition, it’s crucial that you determine a budget for what you can actually afford when it comes to a new or used car.
If you’re a student or single parent, we understand that funds might be a little tight — but you can still get an amazing vehicle if you prepare a budget and practice responsible financial habits before you sign on the dotted line.
Keep reading for our helpful tips to purchase a car on a budget:
1. Make sure your credit is up to snuff
Your credit score is going to be an incredibly important part of getting a new car. Why? Because unless you have a large savings account, it’s likely that you are going to require some kind of financing. A great credit score is essential to getting financing terms that don’t involve a high-interest rate.
If you take a look at your credit score and realize it’s not very high, it might be in your best interest (get it?) to work on raising it before you try applying for financing to get a car.
There are many variables that make up your credit score but general tips to raise it include: paying down your credit card, a low debt-to-income ratio, and paying your bills on time. With a few months of consistent payments, you should see your credit score rebound. You’ll be amazed at the difference in financing terms you’ll be able to secure.
Don’t think that a 3% interest rate will save you much money compared to a 5% interest rate on your auto loan? Think again. Just that slight of a percentage difference may result in thousands of dollars of savings over the life of the loan — depending on the purchase price of the car.
2. Budget accordingly
If you know you’re going to be purchasing a car, take some time to save up for an adequate down payment and cut down on optional expenses. This is a good time to review any subscription-based services you use and to keep track of certain activities like going out to eat. Controlling your spending will help you mentally and financially deal with the purchase of a car.
In addition, think about the additional expenses related to getting the car itself like registration fees, insurance, repairs, maintenance, and gas — those costs add up.
3. Buy used
As soon as you drive a new car off the lot, your new car has already lost significant value due to depreciation. If you opt for a used car, however, the car will likely depreciate at a slower rate. Not only will you save money because a used car will be a lower price point than a new one, but you’ll also lose less money over time from depreciation.
If you’re going to buy used – make sure you do your due diligence. Go for a certified pre-owned Mercedes for sale instead of relying on that sketchy Craigslist ad that seems too good to be true. And always look up a car’s accident history to make sure you’re not getting a lemon that you’ll have to pour money into.
4. Shop around for auto insurance
Auto insurance can vary widely among providers. Don’t be afraid to shop around and look for the best deal. Look for specific discounts like good driver, student, and military discounts, as well. After all, it never hurts to ask and the worst thing that could happen is they say no!
Shopping for a car is serious business. Whether you need a new car because your old beater finally bit the dust or you’re just investing in your very first vehicle, budgeting for that expense can be tough. However, by financially preparing yourself beforehand by boosting your credit score and looking around for the best deal, you’ll be one on your way to getting a new set of wheels in no time without your bank account suffering.