Anything is possible when you know how to save.
You might be in love with the latest Land Rover, keen to buy a Kia or looking to go electric. Whatever form your dream car takes there’s going to be one serious obstacle to you getting the keys for it: the down payment. You’ll need at least 10% of the purchase price of the car as a down payment but the bigger the down payment you have, the less you’ll pay for the car loan.
20% is often viewed as a good goal – for a car worth $15,000, that’s a $3,000 down payment. So, how can you save for the down payment on your dream car?
- Have a month (or two) of abstinence. Sometimes, when it comes to savings where you have a real tangible goal, it can be more effective to go for the hard and fast approach.
Depending on the size of the down payment it could take just one or two months to get to the total you need if those months are really lean. To achieve those savings you could abstain from drinking, smoking, eating meat, going out, travel or buying clothes, for example. Put everything you save from not doing these things into a savings account and see where you are at the end of two months.
- Budget your way to a down payment. How much do you earn and what are your monthly expenses? Sitting down with a budget each week could help you identify where there is extra cash that could go towards your savings goal.
- Put aside little and often.
If you know that it’s going to take some time to get to the savings amount you need for the down payment then you can take the approach of “little and often. ” That could be something as simple as taking your own coffee to work and putting the couple of $ a day you save aside. If you do this with multiple smaller items over a longer period of time then your total will slowly build.
- Break your savings goal down into manageable chunks. If you’re looking at $5,000 as your overall objective for the down payment that might feel like a completely unachievable goal and you could quickly give up. Instead, give yourself the goal of $200 a month over two years (and one month) and you might be surprised by the progress you make.
- Reassess all your regular payments. Are you paying too much for your home insurance or too much for an old loan for people with bad credit when you have now improved your credit score? Could you switch to a cheaper mobile phone plan? Is another energy supplier less expensive? If you can start paying less for your regular outgoings then you instantly create savings that can go towards your down payment.
- Put your money aside when you have it.
Transfer cash into your savings account as soon as you get paid before it can be spent on other things. If you get a surprise refund or tax rebate then add that straight to the savings pot – do not go shopping with it. If you get a pay rise or a second job then funnel all that additional cash towards the down payment until you hit the savings goal.