Instead of borrowing money for a car, such as an auto loan, an easier way to purchase a car is to simply save up for one.
Not only does it improve your chances of scoring a deal at a car dealership, but it can also save you multiple thousands of dollars in loan interest.
Below, are a few tips that we recommend college students take advantage of to save up for their big car purchase, without the hassle of signing onto a loan.
Set an Estimated Spending Amount
First, you’re going to want to set an estimated spending amount of how much you plan to spend on your vehicle. Once you do this, compare a couple of car models and makes to see what’s in your ideal budget. After you choose an ideal price range for your future investment, it’s time to calculate your down payment. If you are taking out a loan, you should shoot to put down at least 20 percent down on a newly purchased vehicle and 10 percent down on a pre-owned vehicle.
Generally speaking, the more money you can save on your own, the better off you’ll be. However, setting a larger down payment on your car can help your loan application process quicker and will help lower your interest rate on the loan itself.
Look for Employment While in College
If you end up getting a job on campus you can save yourself months of saving. Colleges often pay their students who work as residential advisors who moderate room and board. However, other employment opportunities include mentoring, working at the campus cafe, etc.
Create Your Savings Account
Once you’ve decided how much you want to save, it’s time to create a savings account for your hard earned money. However, it’s probably best to open a savings account that’s dedicated for your car savings. This way, you won’t be tempted to transfer money out of it. It may take a couple years to save up for your car, but it’s a long-term investment, so you should place your money in either a certificate of deposit or high-interest savings account.
Now that you’ve made a permanent place for your savings, it’s your responsibility to make regular deposits. One of the easiest ways to do this is to make automatic transfers from your checking account on paydays.
Work with a Car Dealership
You can also try to work with a car dealership to locate a vehicle in your price range, negotiate, and strike up a payment deal. A St. George Hyundai dealership knows that this is a popular course of action for many buyers. Additionally, if you are lucky enough to be replacing an old car, you can use it to cut down the amount you need to save. Trade in your old car and put the money towards your new car.
Get a Side Gig
Between classes, extracurriculars, work-study programs, and more, it can be difficult to handle a full time or even a part-time job. This is why many students are using side gigs to make extra money. You can sign up for a website like TaskRabbit, start walking dogs, or create your own side job, like selling vintage clothes online.
Ask Your Family for Help
If you have poor credit, consider asking a family member to co-sign a loan for you. You will be more likely to qualify for an auto loan if they have a higher credit score. If you do not want to take out an auto loan, ask for your family’s support in other ways. For example, you could ask your parents to help you pay for your car or ask if you can stay on the family cell phone plan so you can save more money each month.
When you are in college, saving for a new or used car can seem like an impossible task. However, with a little bit of planning and saving, you will be able to buy a car in no time.