A car means different things to different people. For some it may be a convenient way to commute, for some it may be a status symbol. Others may view it as a comfortable way to take the family out to dinner or a weekend getaway, and for a few it may be a passion.
This brings us to the big question: How to save for a car?
1) Budget: it is very important to ascertain your income and consequent expenditure. Buying a car is an important financial decision and requires careful planning. Some people can afford to avoid a loan by planning their savings intelligently.
2) Down payment: deciding on the amount of the down payment is very important. Once you have ascertained the price of the car aim to put down atleast 20% for a new car and 10% for a new one, though if you have saved enough money via a Savings Account, you may be able to make a larger down payment, or buy the vehicle outright.
3) Car related expenses: the cost of a car is not limited to its immediate price tag, zeroing in on the right car is extremely necessary. It has to satisfy the need for utility as well as comfort and budget. Pre-owned cars also enjoy as much popularity as their new counterparts. Mileage, the cost of the type of fuel used - petrol, diesel or CNG, the car insurance rates, all need to be taken into consideration.
4) Setting up a dependable financial plan: Since the monthly payments will be a necessary part of your financial planning of how to buy a car, it is essential to establish a sturdy financial account which will help in the long term planning. Savings Account are a very reliable way to do that. you can have a separate Savings Account,when planning to save for a car, so that you are not tempted to dip into funds that are meant for other expenses.
HDFC Bank Savings Account is a very good option. The account opening process is hassle free and instant. Interest rates offer good returns. Liquidity of your fund is ensured and transactions can be done cashless through the Netbanking and Debitcard/ATM facility. There are several cross products benefits available and the interest rates offered helps your idle money to grow as well.
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FAQs
Best ways to save for a car
Keep track of your expenses and income, and create a plan to improve your spending habits each month. The 50/30/20 rule is a popular budget method to follow, and entails spending 50% of your monthly income on essentials, spending 30% on non-essentials, and designating 20% for your savings.
How do I know how much to save for a car? ›
The 20/4/10 rule is a general guide to car buying. It advises that you put 20% down on a 4-year auto loan and spend 10% of your salary on transportation costs.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
What is the best amount to save for a car? ›
Normally, it is between 10% and 20% of the car purchase price. But even if it's not a requirement, there are at least three major reasons to save before taking out a car loan: A bigger deposit reduces the amount you need to borrow, making your payments more affordable or the repayment term shorter.
How much money should I have before I buy a car? ›
In general, a good rule of thumb is to aim for 10% down for used cars and 20% for new vehicles. For example, if the new car you've settled on costs $25,000 and you want to make a 20% down payment, you'll need to save $5,000.
What is the best first car to buy? ›
The easiest car to recommend to just about anyone looking for a good first car is the Honda Fit. Affordably available, solidly reliable, extremely space-efficient, and easy to drive, the Fit carries on the tradition of lightweight Honda hatchbacks from the EG and EK Civics.
What is a realistic budget for a car? ›
According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.
What car can I afford with a 40k salary? ›
on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000. And at 150 k salary, that means your max car price should be 50 2500.
How much should I actually pay for a car? ›
Financial experts recommend that your monthly payment should be around 10% to 15% of your monthly take-home pay. Additionally, your total monthly car expenses should be no more than 20% of your monthly income, and this includes your car payment, insurance, maintenance and gas.
Is a car payment a need or want? ›
A monthly auto loan payment typically falls into the “needs” category.
How much should you save each month? For many people, the 50/30/20 rule is a great way to split up monthly income. This budgeting rule states that you should allocate 50 percent of your monthly income for essentials (such as housing, groceries and gas), 30 percent for wants and 20 percent for savings.
How much should rent be of income? ›
It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.
Is paying 500 a month for a car too much? ›
How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.
How much of my paycheck should I save for a car? ›
If you receive 26 paychecks per year and hope to hit your savings goal in two years, here's what you would need to save per paycheck in order to buy a new car: For the average ~12% down payment ($4,556) after 2 years: $88. For a 20% down payment ($7,788) after 2 years: $150.
Is $300 a month for a car too much? ›
This means that if a person earns $3,000 per month, a car payment that is greater than $300-$450 per month may be considered high. It's important to keep in mind that a car payment is just one of several expenses associated with owning a car, including insurance, maintenance, and fuel costs.
What age should you start saving for a car? ›
It's never too early to start saving money. If you think you might want to buy your own car, start putting aside birthday money and earnings from summer jobs. The earlier you start, the more you can potentially save by the time you are old enough to drive. Consider the age at which you can get a driver's license.
How to save for a $40,000 car? ›
Set A Monthly Savings Goal
Divide your goal by the number of months you intend to save. Say you want to buy a vehicle that will cost roughly $40,000 after taxes and fees, and want to save for a 20% down payment, getting a monthly payment amount that agrees with your budget. That means you'll need to save $8,000.
How much should I save for a car down payment? ›
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
How much money should you spend on a first car? ›
If you take pride in your frugality, 10–15% of your income sounds about right. If you value the reliability a newer, more expensive car brings, then 20–25% is a good benchmark. This gets you $5,000 to $7,500 on a $25,000 salary. Still not a lot, but you'll have more options.
