How to save for your first car
Buying your first car is an exciting milestone, but it can also be an expensive endeavour that may require some forward planning.
While your first car is more likely to be a modest second-hand runabout than a top of the range Tesla, it will typically still cost several thousand dollars to buy one that runs reliably and fits your needs.
While a fortunate few might have this kind of money readily available, many first-time car buyers will need to spend time saving up. But while it might seem daunting to set a savings goal of this size, there are steps you can take to make it more achievable.
1. Set your budget
Start by researching car makes and models you’re interested in to get an idea of how much you may need to spend. Used car prices tend to fluctuate depending on availability and other factors, so it’s important to shop around for an accurate representation of pricing.
Once you know how much your first car is going to cost you, it’s time to set your savings goal. Be realistic about how much you can afford to contribute towards your car fund each pay cycle and calculate when you should reach your goal.
To keep you motivated, you might like to stick a picture of your goal car somewhere you’ll see it often, with the date you’re hoping to accomplish your goal written on top.
2. Open a separate savings account
Keep your car savings in a separate bank account to the rest of your money so it’s easy to see how much you’ve saved and avoid accidentally spending it. You could even go one step further and set up an automatic transfer for the day after you get paid. This way you take the guess work out of it which may make it easier to stay on track.
Many banks will allow you to have multiple savings accounts in your name, which are relatively easy to set up within your existing online banking platform. Alternatively, you could consider comparing high interest savings accounts and look into opening one with a different bank. This option could also help you keep your savings less accessible, minimising the temptation to chip into it while you work towards your goal. Plus, the interest you earn each month will help grow your savings.
3. Boost your savings
If you’re keen to reach your goal sooner, you could consider ways to save in addition to your income, such as:
- Your tax return
- Gifted birthday or Christmas money
- Money made from selling unwanted items such as clothing, electronics, etc.
Adding these one-off lump sums to your car savings fund could help you get behind the wheel sooner than you think.
4. Don’t forget about on-road costs
Once you’ve saved enough to buy your car, it’s important to make sure you also have enough to cover on-road costs such as stamp duty, registration and insurance.
The amount you’ll need to have ready for these additional costs will typically depend on the type of car you buy, how much you pay for it, and where in Australia you are located.
If you’re buying a car second hand, you may not need to worry about registration right away if it’s not yet expired, but you’ll always be required to pay stamp duty and CTP insurance at a minimum.
What if I need a car sooner than I can save?
There may be some situations in which you need to buy a car within a certain timeframe, such as if you are moving away for university, have accepted a job that requires you to drive, or you have other driving-related responsibilities to fulfil. Often, this can make it more challenging to save up if it puts too much pressure on your budget to reach your goal by the deadline.
If this is the case for you, you could consider taking out a car loan. Most car finance providers offer used car loans for the purchase of used vehicles up to a certain age – typically 10 to 15 years.
If you are considering this option, it’s important to remember that a car loan is a significant financial commitment that can take several years to pay off. So, you’ll need to be certain that you can meet the repayments each month. Check out RateCity’s car loan calculator for a repayment estimate and be sure to check the eligibility criteria of your selected loan product before you apply.
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Product database updated 09 May, 2024
