How to Budget for Your New Car

When you need, or just want, a new car or truck, budgeting your money can seem like a hurdle, but it doesn’t have to be.

While you can purchase a vehicle with no money down, the more money you can put down on a car, the better deal you will get and the less you will spend overall. According to financial experts, the optimal budget guidelines when preparing to buy a car are laid out in the 20/4/10 rule:

• Plan to put at least 20% of the purchase price down
• Limit the loan term to 4 years (48 months)
• Spend no more than 10% of your gross income on monthly payments

So you might be wondering: How can I do this? We’ve outlined some quick tips to help you jumpstart your budget and get you on the path to your new vehicle.

1. Define a budget

The first step in budgeting for your new vehicle is to determine how much you can afford. Use the 20/4/10 rule to help you determine how much you will need to put down and how much you will need to have for monthly payments. Then, plan to save at least the down payment and the first few monthly payments before you make your purchase. Remember that you will also need to budget for registration and insurance fees in addition to the monthly loan.

2. Set up a savings account

Now that you know how much money you are planning to budget, the next step is to create a secure place for your savings. It is often easier to save money if there is a specific place for it to stay so you aren’t tempted to use it. This might look like opening a separate savings account or starting a savings jar at home.

3. Save now by limiting unnecessary spending 

Try to cut out some expenses that aren’t necessary and put that money into your savings account or savings jar. These expenses could even be small purchases, such as online shopping, your daily cup of coffee, or entertainment subscriptions. Even though these purchases are not much, they can add up over time.

4. Give yourself time

The old cliché is “good things take time” and budgeting for a new car is no exception. While time is not something we all have, if you can, give yourself some time before you need to make the car purchase. Many experts say that you should give yourself 12 to 24 months to budget and save for future car expenses.

Budgeting tip: Even if you are not in the market for a new car right now, it is a good idea to begin setting aside money for your next car purchase and vehicle maintenance costs.

Here at Elder Chrysler Dodge Jeep Ram of Cedar Creek, we would be happy to help you plan for your next vehicle and figure out your budget. Give us a call at (903) 713-8676 or visit us at 309 N Gun Barrel Ln, Gun Barrel City to begin your vehicle-buying journey!