Buying your first car is a moment you will never forget.
You’ve passed your test, or are having driving lessons, and are itching to get behind the wheel of your very own car.
Setting up a car fund doesn’t have to be a daunting process. Just follow our simple, actionable tips and start saving for your car today.
Eight tips for setting up your car fund
1. Set your budget
There’s no denying that cars are expensive and take time to save for.
Whether you’re planning to buy a car outright or take out a finance agreement, it’s important to set a realistic budget.
How much you need to contribute to your car fund will depend on the type of car you want and how much you can afford to spend on monthly costs.
Regardless of which option you choose, having more savings to put down as a deposit will reduce the overall cost of your car.
Don’t forget to budget for the running costs
The cost of a car doesn’t stop as soon as you’ve purchased one. There are ongoing running costs required to keep it road-legal that need to be factored into your budget.
- Car insurance
- Road tax
2. Open a savings account
Setting up a separate account that’s purely for your car fund is an effective way to save.
Have a look at accounts that offer good interest rates to make saving for a car quicker.
Use comparison websites to find the best savings account for you.
Fixed-term savings accounts will offer a higher interest rate but you won’t be able to access your money for a fixed period.
Calculate your income and expenses to find out exactly how much money you have to save and how long it will take you to achieve your target.
Once you have done this, set up regular payments from your current account to your savings account based on what you can afford and any disposable income that you have.
Now you know how long it will take for you to save for your car, mark the date in your calendar to give you something to look forward to and help motivate you to keep saving.
3. Change your spending habits
Consider what’s important to you. Would you rather keep up with your friends and have the latest model phone or get your independence by adding to your car fund?
When it comes to spending money, choose less expensive alternatives such as downloading one or two songs rather than a whole album.
Avoid making impulse buys while saving as these can damage any efforts that you have made.
Take time to research any potential purchases to give yourself time to consider whether you actually need an item or if the money could be used for your car fund instead.
Buy used items instead of new where possible, for example, clothes and books.
Hold a garage or car boot sale for any unwanted items such as electronics to boost your car fund pot.
If you’re still lucky enough to receive birthday and Christmas gifts from family members, tell them that you’re saving for a car and ask them to contribute to your car fund instead.
4. Create a list of needs versus wants
It can be easy to get carried away with the excitement of buying your first car or purchasing a new model.
Start by asking yourself the following questions:
- How far and often will you travel in your car?
- How many people will regularly be in your car?
- Do you need to carry large pieces of equipment?
All of these questions will help you determine the type of car you need and what you can afford.
Be honest and realistic with your list. If you don’t travel far or have many passengers, a smaller petrol car will be much cheaper than a larger diesel car, both on the initial cost and running costs.
5. Set a realistic timeframe
Unless you are lucky enough to have a win on a scratch card or a high amount of disposable income, saving for a car will take a while.
Unachievable timescales will only demotivate you and risk you giving up on your goal.
6. Start a side hustle and boost your car fund
Boost your car fund through taking up an extra evening or weekend job. An extra source of income is a great way to accelerate your savings progress and become the proud owner of a new set of keys in no time.
Side jobs such as dog walking and babysitting are great ways to earn a bit of extra cash.
7. Finding your first car
So you’ve done the hard work of saving for a car, now it’s time for the exciting part, buying one.
Use local dealers and Autotrader to research the models you’re interested in. There are different routes you can take to purchase your new pride and joy.
Buying privately is usually a cheaper alternative to purchasing one from a dealer.
If you decide to buy privately it’s important to factor in the cost of taking out a warranty for some additional peace of mind, and also conduct a full Hire Purchase Investigation (HPI) report to make sure that your new car is not stolen, previously written off or has any outstanding finance on it.
Purchasing from an independent dealer will potentially cost more than a private purchase but the car will usually come with a warranty as part of the sale price along with an HPI report.
Cars purchased from dealers are prepared before the sale with any required maintenance taken care of such as its next service.
A franchise dealer is backed by a car manufacturer which could result in a slight price premium over an independent dealer for a similar car.
However, a franchise dealer will have a warranty and aftersales package backed by the manufacturer for additional peace of mind.
If you are looking at financing your new car, franchise dealers often have a number of incentives such as a contribution towards your finance deposit and free servicing offers linked to their finance package.
Websites such as Autotrader will also have price markers on their adverts which will help reassure you that the car you are looking for is advertised for a fair price.
8. Saving for a better car
There are several ways you can save money if you’re considering upgrading your car.
Part exchange your current vehicle: Part exchange works by trading in your existing car for a sum of money that will be used as a deposit for your new car.
The amount of money offered by the dealer will depend on the condition of the car you’re trading in, which car you’re looking to buy, and the profit margin of the dealership.
Buy an outgoing model: Cars that are being replaced with a newer model will often have good deals available in order to make room for new stock.
Keep an eye on when new car models are due out and secure yourself a good deal.
Sell your car privately: You’re likely to get the best price for your current car from selling it privately.
The extra cash you make can then be used as a deposit for a new car.
If you want to avoid the hassle of selling your car yourself, consider using third-party companies who will sell it for you for a fee.
Consider a pre-registered car: These cars have been registered by the dealer usually to hit sales targets at the end of the month or quarter.
There are often some great savings to be had from the manufacturers’ list price.
The car will be a brand new car with delivery mileage and the dealer as the first registered keeper.
The balance of the manufacturer’s warranty is then transferred to you.
If you are considering a pre-registered car on a dealership finance package, it could be worth looking at an equivalent car brand new as pre-registered cars usually do not qualify for the new car offers available, meaning that a brand new car deal could be more attractive to you on a monthly payment basis.
Enjoy the experience of saving for, and buying, a new car
Purchasing a car can be an overwhelming experience but it should be an enjoyable one too. If you are feeling nervous about the experience, take someone with you for some support and guidance. Never feel rushed or pressured into making a decision that you’re not comfortable with.
Follow our advice above when saving for a car and before you know it you will be behind the wheel of your first car or upgrading to an even better one. For the latest personal financial advice, visit our website.