Buying a car is one of the most expensive decisions you will make today. That’s why having a budget is mandatory. Not having a budget or financial plan is what most people would call a failed mission because you would probably spend more than your limits if so. The only way to combat spending other than what you have in mind is through budgeting.
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That is why getting a car loan is a good idea, as it would help you get your dream car while you pay it back at your own ease and convenience as the loan payment is spread out.
Create a budget
Compile all of your monthly expenses, including your necessities, transport, bills and utilities, and food. Following this, we advise following the 50/30/20 budgeting strategy, which divides your monthly income equally between requirements, wants, and savings.
How much cash do you need to put aside if you want to purchase a new or used car? It’s crucial to remember that the more money you save, the less money you will need to borrow and pay interest. Long-term savings depend on how disciplined you are with your money. If you run a business or have a competitive salary, this wouldn’t be a problem; budgeting will still be needed, but your financing will not be so stifled.
Is an automobile a want or a necessity? Asking yourself, “Am I acquiring this car because I need to get to work and facilitate daily tasks?” will help you find the answer. or “Am I purchasing this vehicle because I desire a lovely vehicle to travel in?” This will enable you to choose whether the budget for the car should be drawn from the 30% “wants” budget or the 50% “needs” budget.
Set aside additional funds for auto-related costs.
Don’t forget to factor in recurring expenses like insurance, fuel, maintenance, and repairs when figuring out your budget. Your driving skills, age, vehicle type, and salary will all have an effect on the cost of your insurance premiums. It should be noted that third-party insurance is mandatory to get in Nigeria so as to protect third parties in case of accidents you cause.
Petrol prices vary and change frequently, which is why it is important you budget between N5,000 and N10,000 per week if you are driving far distances. The kind of job you do and its location affect the amount you would spend on fuel. For instance, if you are an Uber or taxi driver, the amount you spend on fuel will be higher than this, which is dependent on the number of rides you plan on taking every day.
If you plan on taking long trips, like for instance, from the Mainland to the Island, a budget of N10,000 per week might not be achievable; you might want to budget higher in this regard.
If you purchase a used automobile, think about obtaining a maintenance plan from your mechanic. What this means is that, if you are planning on buying a used car, these scars are more susceptible to repairs and failures, so in setting up a maintenance plan with your mechanic, you can negotiate with him on how much he would charge for monthly oil changes, servicing inspections, and other required maintenance, and you should make sure you try to beat down the price as much as possible. If possible, learn some DIY skills that can help you save money.
Savings needed for a down payment
Buying a car outright is most people’s dream, but with the rise of inflation, it might not be possible, so it is important you try as much as possible to set a budget and get the best financing that would help you buy the car. If you have a good salary, getting a car loan from the bank or dealership would be no problem at all. Once you have done this, the amount you would have to pay down is what you should consider in your budget.
The size of your down payment will depend on the vehicle you want and can afford. Choose your budget and then start looking for vehicles in that area. For a used car, the conventional rule is to save 10% of the sale price, and for a new car, 20%.
For instance, you should pay at least N500,000 if the used car you want costs N5,000,000. You should put down at least N1,400,000 up front for a new car that costs N7,00,000. Having a good salary or inflow of income helps you qualify for a loan, obtain a cheaper interest rate, and have manageable monthly payments; doing this will help you get a better bargain.
Decide what kind of car you require
We all desire the best, priciest, fanciest, and fastest cars, but selecting the correct vehicle for your needs and financial situation will help you save more and more money. While buying a car, you should consider asking yourself the following questions:
- Do you need a car, a van, a truck, or an SUV?
- Do you intend to use it for work, play, travel, or school?
Which characteristics are essential, and which ones are optional? You can use CarMart.ng to estimate the reasonable purchase price once you’ve decided what kind of car you’re buying.
Make a savings account
If you don’t already have one, we advise opening one to keep all of your stored funds in a secure location. To avoid being tempted to spend the entire balance on something else, make sure this account is out of your reach. Once you’ve done that, you’ll be able to make a deposit into your savings account every week or month. It could be wiser to automate it so that money is transferred from your checking account to your savings account without your involvement.
Trade in or sell your current vehicle
If you already own a car, you can sell it or trade it in and use the proceeds to purchase a new one.
The more down payment you make, the shorter time you’ll spend owing more on the automobile than it is worth because cars lose value over time. In order to finance a new car instead of piling existing debt on top of new debt, this is crucial if you wish to trade in your old car.
The majority of the time, it is best to sell it yourself because you might earn more money than through a trade-in. If, however, you still owe money on your present vehicle, this process becomes a little more challenging. Yet, if you’re persistent and can locate a buyer prepared to deal with the circumstances, you may end up with a sale price that is thousands of dollars higher than if you had traded it in.
Reduce needless spending
One of the easiest methods to save money is to spend your money sensibly and consider what you actually need against what you want. For instance, temporarily cutting back on daily snack purchases or dining out three times per day can result in significant savings in the future.
Consider how you may alter some of your routines to avoid fully restricting yourself and to occasionally treat yourself while maintaining focus on your objective and allocating additional money to your car-saving funds.
Earn additional money
If you intend to purchase a car soon, think about pursuing a side business.
This could involve finding small temporary jobs in your city or selling items you no longer use. It could also involve working from home. Don’t give up; every little bit counts and accumulates over time. You’ll arrive there sooner than you anticipate.
If you are truly on a tight budget and need to save money on a car to buy, why don’t you check out Carmart.ng, the largest automotive marketplace that houses the cheapest cars you can come across?
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