Being a working adult means having the freedom to buy whatever you want, so long as it’s within your budget. To many, their first big paycheck is special and sentimental. They can finally buy a new phone or travel.
As a fresh graduate who’s just started working and buying with your hard-earned money, the world feels like your oyster! Down the line, you might even consider purchasing a car.
A car is an excellent investment, which is why the automotive industry thrives, especially in the Philippines. For one, being able to drive gives you easy access to different amenities and locations. And it’s convenient—given that the metro is well-connected.
While your first thought would lean towards a new car model, the price tag attached to it might make you think twice. Don’t let this stop you, as there are ways to help you save up! You can also opt to apply for either car financing policies or auto loans, which have offerings that are accessible, affordable, and have many benefits.
Whether you choose to borrow or not, it still makes sense to start saving for a car as early as possible.
How to Save for a Car: 7 Car Saving Tips
When saving for a car, or anything for that matter, discipline, research, and setting realistic financial goals are key. Not only do these help you get what you want as soon as possible, but they also keep you on track and adjust whenever needed.
1. Calculate your down payment
When choosing a car, price is one of the factors that can affect your decision. Choose a model based on the price tag you can afford or with a price that you are confident you can pay off.
Once you’ve identified your price range, you can determine an approximate down payment amount. For newer models, you should aim for 20% of the total price, while 10% for older vehicles.
2. Set aside a budget for expenses related to your car
Regardless of your salary schedule, you’ll need to set aside a percentage for expenses owning a car entails. A good rule of thumb for saving is the 50/30/20 rule, in which the biggest portion of your earnings goes to necessities, followed by wants and savings.
Your car expenses may be considered a necessity since it helps you travel to work or go from point A to point B. However, upgrades, embellishments, and other additional features are “wants” since they don’t affect the car’s performance.
Other car costs to save for include amortizations, registration fees, parking allowance, gas, repair, and maintenance.
3. Set up a savings account
Now that you have a rough idea of how much your car will cost and how to save for it, you can keep your funds safe by setting up a savings account. Opening a savings account can also minimize the temptation to take money from your car savings for other purchases.
A savings account can also help you earn passively before your next deposit, which can speed up the process of affording a car. You can put the funds you’ve accumulated in a high-interest savings account.
4. Automate your savings
Once you know your target amount and have a safe place to keep it, skip the grueling process of depositing manually every month by automating your transfers!
Do this by setting up a recurring monthly payment or subscription to put part of your earnings into the savings account automatically. Through this arrangement, you have one less thing to worry about. Subscriptions stop if you manually cancel them or the recurring payment plan expires.
5. Consider short- to medium-term investments
Like interests in savings accounts, investing is another way to earn passively while trying to reach your car savings goals. If you think it’ll take a few more years to afford the car you want, consider using this time to have short to medium-term investments.
Investing in stocks, bonds, and mutual funds can increase your savings and financial resources. While they can add to your car savings, it’s still important to research and invest only in reliable entities. Additionally, you should only invest an amount you can comfortably spend.
6. Limit unnecessary spending
Although you’re allowed to spend your money how you want to, limiting it to save more is where you’ll need the most discipline. This isn’t to say you shouldn’t spend on your wants; instead, don’t spend on things you don’t want and will discard almost immediately. The sooner you break this habit, the faster you can save to get your car.
7. Get different streams of income
For some, monthly salaries aren’t enough to afford a car. If that’s the case for you, consider looking at other ventures that enable you to earn extra. This can be a side hustle that you can do in your free time or investing in stock markets. No matter how small your earnings here are, they can still help your car savings grow.
Drive Your Dream Car Now
Whether you’re an aspiring car owner or looking for an upgrade, saving for your next big purchase can be challenging. Hopefully, with the tips above, you can make better decisions and implement effective practices on how to save for a car.
If you’re looking to apply for loans to get your dream car faster, check out AsiaLink Finance and their online loan services in the Philippines. Whether you’re applying for a first-time car buyer loan or a used car loan, Asialink Finance has you covered!