To Top

Save Up for A Car Without Even Noticing

Making your car payments each month is a stressful thing to do. Depending on how much money you need, you might spend as much as 20 percent of your income simply making the payments for something you already own. But now that the payments for your previous car are over and you want to buy a new one, here is how you can do it without needing to loan money again.

Imagine a life without car payments? Realistically, taking out a loan to buy a car is not a really good investment. Not only will you end up paying significantly more than the market value of your car thanks to the interest rate you will have to pay, but, by the time you are done with your payments your car will lose almost half of its value. This depreciation of the vehicle you purchase means that you have made a really poor decision that you will have to pay for months after you have already paid the full value of the vehicle. So, instead, try tricking yourself into getting ahead of the curve.

Stop paying for interest

So, once you are finally done with paying the rates for your old car, and you decide it is soon going to be a time for a change, are you going to go right into another commitment of monthly payments? You could, but at one point, one should realize that it is just money down the drain if you do it that way. So what is the trick?

The trick

The Trick is rather simple. If you can afford it, pretend that you are still making car payments, but, instead of giving the money to the bank that helped you purchase the previous car, give it to yourself. Well, your “piggy bank”. You are already used to living without those 400 dollars each month, so try and separate them to save up for the next car. In a year you will have almost 5,000 dollars and you will be well on your way to a new car, loan-free.

Also, remember the interest that you had to pay with those monthly payments? Well, now, the interest is working in your favor. If you choose the right bank to hold your money for you, the interest alone will help you save up hundreds, if not thousands of dollars over time. All you need to do is find a bit of patience and delay the purchase of your next car by a couple of years.

And, you do not even have to save up the full value of the car. You can still purchase it by taking out a loan, but this time, you will be opening the loan for a lot less money than the first time around, meaning that your monthly payments will be significantly smaller.

Realize that your five-year-old car is still a kind of new

Just because you no longer have to make payments for your car, doesn’t mean that it is high time for you to start doing it again simply to drive the newest model and show off. All you need to do is delay the next purchase a little and there you go! Money saved.

Realistically, after five years of driving the same car, you will, on average, not going to drive it for over 70,000 miles. And that is not too much for your engine. Most of the time people put down, well nothing, when taking out a car loan. But the savings can be huge if, instead, you put down 10,000 dollars upfront.

Or, actually be patient for once

Instead of just waiting for a year and a half or so, try getting enough money to simply buy a car from the dealer without needing to borrow a single dime. Once you go for 2 years of saving up money this way, you will notice that it is rather easy to wait for 2 more years before buying a new car. And, after that time passes, you will finally have a new car and you will no longer need to make monthly payments at all.

What is the actual alternative to this plan?

You could always just take out a loan every five years and perpetuate the interest paying forever. An average monthly payment for a car is already as high as 500 dollars and after 4 years of saving to simply buy a new car, you are basically “buying” yourself five years of not paying the monthly rent. We understand if this is not quite a simple task to understand. But it does work. Not to mention that the money you are saving up can always be used as an emergency fund should the need arise. Something that you cannot do if you take out a loan.

More in Wallet Groove

You must be logged in to post a comment Login