Have you found the perfect car, truck or SUV? It looks great, has all the features you could ever want and drives like a dream – the only problem is the price tag. This common woe-inducing conundrum affects people in many aspects of their life, not just auto shopping, but it can be especially frustrating when it’s vehicle related. A Hollywood Hills mansion is out of the average person’s reach, but a high-end vehicle is one of those conceivably attainable major purchases you could consider if your finances were just a bit better than they currently are.
Unlike the 20-bedroom home in the Santa Monica Mountains, this is one dream you don’t have to abandon. There are actually very reasonable adjustments you can make to your saving and spending habits that can help you afford your dream vehicle. What’s more, these strategies can be applied to other big-ticket item purchases you want to make in the future.
You’ve probably heard the aphorism “fake it ’til you make it,” and although it doesn’t necessarily apply directly to car buying, there may be some very loose parallels. Try using positive thinking to imagine you’re driving your luxury dream vehicle as opposed to your current clunker.
The idea is you buy vehicles you can afford and save as much as you can for a set period of time, like $400 a month for a year, for example. At the end of the year you sell your affordable vehicle and purchase a nicer vehicle with the proceeds of your sale combined with your savings.
If you bought a $5,000 car and sold it for $4,000 a year later you’d have $8,800 to buy a nicer used vehicle.
Repeat the process until you have saved enough for a healthy down payment and a much more affordable monthly financing payment. This method is much more pleasant than purchasing a car out of your price range and having to eat ramen for every meal because your $700 monthly car payments wipe out your first paycheck each month.
How many times you have to repeat the process is highly dependent on your starting point and the cost of your dream vehicle.
If you know you’ll be financing your dream car it’s not a terrible idea to get used to making the monthly payment by saving that amount each month. You can get an idea of what your monthly payment would be based on your credit score and the value of the vehicle you want to buy. There are many car payment calculators on the internet that will allow you to ascertain that figure relatively easily.
Consider opening up a savings account dedicated to this purchase. Having a separate account lets you more easily track where you’re at in terms of progressing towards that purchase goal and will make it easier to keep your hands off that money by not having it mixed in with your other assets. Try to find either a really affordable savings account or preferably one that’s free so the bank isn’t taking a monthly or annual fee out of your car savings.
If the price tag on your dream vehicle is out of reach, chances are you will end up needing to finance at least part of the purchase when it is finally attainable. Finding the right bank or auto lender to finance your auto loan is the best way to ensure you’re not stretched too thin each month or buried in compounding interest. The key is to shop around. Don’t just settle for dealership financing or the first auto loan you come across.
Make a list of potential options and check institutions you may not immediately think of. The big national banks are not the only lenders out there.
Credit unions are member owned, which means their profits go back into the bank to make things like auto loans and other types of financing more competitive for their clients/owners. Chances are there are some local credit unions that offer competitive rates and unique member benefits.
You may get a better rate through the financial institution you do the rest of banking with, so if you have a mortgage, checking and savings account, it may be worth it to move them to a more competitive institution. If you’re happy where you are, consider acquiring your auto loan through your existing bank if they offer good incentives for people who utilize multiple financial products through them.
Although more leg work is involved, you’ll almost always get a better deal buying from an individual or repo auction instead of a dealership. Just make sure you do your homework. The benefit of buying from dealerships is having access to certified pre-owned vehicles and vehicles that have extensive inspections performed on them prior to going on sale. If you do buy from a private seller, request a CARFAX® report or some other type of vehicle history to ensure you’re not buying a salvage vehicle that may have significant underlying issues that aren’t readily apparent.
At American Financial Solutions, we’re dedicated to helping people deal with debt and manage their finances. From assistance with credit counseling and bankruptcy to student loans and debt consolidation, our experienced financial professionals have valuable advice and guidance to help you achieve better, more stable financial health. We encourage you to contact us today at (888) 864-8548 if you would benefit from some assistance reaching your financial goals.