Many consumers consider taking out a loan for buying a new car or for an installment purchase. But this way of financing your car costs a lot of money. After all, you pay a substantial interest on the loan, while you actually receive interest on savings. How can you save smartly for a car?
Save for car – Save amount
The first step you take if you want to save for a car is to determine how much you want to save. Do you want to buy a simple second-hand car of 5,000 euros, or do you need 10,000 euros or maybe 25,000 euros? Then you see how much you can save each month. Suppose you want to save 10,000 euros for your car and you can save 250 euros every month, then you need 40 months or more than 3 years to save the car together.
If you want to buy a car earlier, you have to settle for a cheaper car or make sure you can save extra. For example, by working extra hours or by putting your vacation pay in the car.
Saving for cars – The right savings account
You save more specifically if you open a separate savings account specifically for the car. You never mix up different saving goals and see exactly how much you’ve already saved and how much you still have to save. To save for your car it is best to open a regular savings account, because you can deposit money into the account at any time and you can withdraw the money immediately when you want to buy the car.
A deposit often results in a higher savings interest if you lock in an amount for a longer period. But you may not withdraw this money during the term. That is why this type of savings only fits when saving for a car if you already have an amount available and want to reserve this in a separate savings account.
Save car – Tips
- Transfer additional amounts of money, such as your year-end bonus and holiday pay, to the savings account for the car. You can also ask for money for the car for your birthday. With this kind of extra amounts you save a lot faster for the car.
- Some savings accounts offer the possibility to automatically transfer money from your checking account to your savings account every month. This way you don’t have to worry about saving and you never forget to transfer money to the savings account.
- Choose a good savings account with a stable high interest rate and good conditions. For example, consider whether or not you want bonus interest, whether you are obliged to open a checking account with the savings account and whether the interest is deposited in the savings account or in your checking account.
- After buying a new car, immediately start saving for the next car or for repair costs to the car. This way you avoid having to take out a loan for a car later.