Tired of the old wheels and want to start saving for a new car this year? 2020 was a bit of a write off so we reckon now is the time to splash out on a bit of a spoil. Plus, some say that now is the best time to buy a new car thanks to COVID-related price cuts. Here’s a few ways to scrape some extra cash together and replace the rust bucket with a new ride.
Saving for a new car in 2021: cutting costs
There are really only two ways to build up your savings for something you want: cutting your costs, or increasing your income. Ideally you want to combine these strategies even if just for a short period.
Read on for tips on how to accomplish both.
Draw up a budget
The first step to saving for a new car is knowing how much you’re spending and how much you need to save. First look at what type of car you can afford according to your budget. No point in getting excited about the latest BMW then realising well into your planning that it’s way out of reach.
Then, look at how you’ll pay for the car and what deposit you’ll need if not paying for it in full. Work out from there how long you’ll need to save X dollars for if you want to buy in Y amount of time. For example, if you want to put down a deposit of $5,000 in six months’ time, then you need to save just over $800 per month.
Have a look at your expenses and income, and see how much you are able to save at the moment. Then split your outgoings into categories over the last 6-12 months to see your average spend per category. Are there certain areas where you could cut back? One of the most common culprits is food. Maybe you go over budget because you often order pizza instead of cooking, or maybe it’s because you love the finer things in life and can’t resist buying the good steak when you’re shopping.
Set yourself a spending limit per category that you think you can stick to, and make sure to hold yourself accountable. If you want to really maximise your savings, try cutting some non-essential spending like new clothes or nights out down to zero.
Check your debits
You should have a good idea of what debits come off your account every month: rent or mortgage, car insurance, maybe a gym or Netflix subscription. You get the idea. If you look closely though, you might find a few debits that you signed up for ages ago and forgot about.
Comb through them and cancel any you don’t need, and try to negotiate a better rate on the ones that you do. That random app subscription might seem small, but if you’re saving for a new car, every little bit helps!
Saving for a new car by increasing your income
If slashing your budget isn’t going to give you enough savings for a new car, you’ll have to look at earning extra money.
In the long term this can obviously be challenging as it would normally require a change of job or sustained extra income streams. In the short term though, it could be worthwhile and those few extra dollars could give you the boost you need for a new set of wheels.
If you own a business (or your side hustle becomes a business of its own!) then you might want to read our advice on how to finance a business vehicle.
Sell unwanted goods
It’s probably time to Marie Kondo your house anyway, right? Kill two birds with one stone and have a big de-cluttering session. Donate things that you can’t sell, and list everything else on eBay, Gumtree or Facebook. Apparently, the average household has over $5000 worth of unwanted goods. Not bad, right?
People have a use for everything from old handbags and clothes to your unused coffee table. Hey, maybe you could even do some upcycling! If you want to take this one step further, lots of people make a decent side income by scouring classifieds for well-priced goods that they can sell on at a profit.
And remember, your soon-to-be unwanted (by you, anyway) car can also generate some cash for you. If you can get a good price on your old car, that might just be a hefty deposit towards the new one you’ve been eyeing up. To make the selling process as efficient and painless as possible, read our tips on the best way to sell a car.
Start a side hustle
They say that a side hustle is essential nowadays. But even if you just want one for a few months rather than forever, taking on some extra work is always a good option to boost your savings.
Finding work can be the hard part, depending what you’re looking for. If you can use one of your hobbies or skills, that’s usually the easiest and most enjoyable option. Perhaps you could offer pet photography, writing, graphic design, swimming lessons, or even babysitting or tutoring services?
Saving for a new car: forgotten expenses to consider
Before you put down your deposit, keep in mind that there may be some additional costs that you need to scrimp and save for. For instance, if you upgraded from an old Kia Picanto to an SUV or ute, you’re probably going to need to part with a little more money each month for petrol than you’re used to.
Doing your research around fuel consumption and crunching the numbers can help you make an informed decision. It might make you cringe a little, but better to know what you’re in for now when it comes to petrol costs than have a nasty shock when you start filling up regularly!
Depending on whether you buy a car brand new or used and whether it’s within service plan or not, you might need to set aside money for this. If your car was bought on finance, you also may have a balloon payment to set money aside for.
When it comes to financing your car, remember you may have the option for a novated lease instead of a car loan – depending on what your employer offers. Sounds a bit overwhelming? Check out our advice on whether a novated lease or a car loan is better for you.
Finally, remember that your insurance costs might change when you get a new car. If the new car is much more expensive then your premiums are likely to be higher, but it will depend on a variety of factors. Here’s some useful advice on how to save money on car insurance.
Have you considered insurance for your new car?
If you’re saving for a new car, why not get an idea of how much car insurance would cost on your dream one? Get a quote here and be prepared.
Now the only thing that remains to be decided is whether you want that sexy red model or sleek silver. If safety is a big factor, check out our blog on the safest car colours… you might just be surprised by the findings.
Saving for a new car – over to you
How did you save up to get your newest car… or are you still working on it? Let us know in the comments.