If you can save to get a new vehicle, you can reduce the amount you need to borrow for this purpose. It gives you a bit more bargaining room at the dealership and can save you a lot of money. While saving for such a large purchase can take time and motivation, it is entirely possible to do.

Considering Your Existing Assets

The first step is to figure out how much you will need to pay so you can set smaller milestones long the way. Compare models and brands to figure out how much you will need to spend on a vehicle and work backwards. Think about the money you do have, such as savings accounts, and if you have other assets, such as life insurance you no longer need, you can consider converting them to cash for your car. You can use a life settlement calculator to figure out how much your policy is worth to help you make your decision.

Budgeting for Other Expenses

it’s easy to get so wrapped up in paying for the actual vehicle that you forget about the other costs of car ownership. It's a good idea to think about how the expenses for a new car might differ from your old one. For example, you might need to register it or pay other one-time fees when you first get it. And the cost of gas and maintenance could differ as well. Know that you will need to add insurance and car payments to your budget, and this can be more costly than if you currently own a car outright.

It's a good idea to make sure that all expenses related to a car are no more than 20 percent of your income. So even though it might be more expensive now to get another vehicle, it could cost you less if you currently pay a lot for repairs on an older vehicle. One way to get to your goal faster is to reduce any unnecessary spending. Cut out any wants in your budget and put all that money toward your next vehicle. This might include things like new clothing, dining out, or other entertainment.

Making Savings Easier

It's a good idea to have a separate account for your car so you can easily keep those funds separate from your other money. If you have several years to save, you could put your funds in an account that will grow interest, such as a CD.

One of the benefits of using a savings method like a CD is that there is usually a penalty for early withdrawals. That can reduce the temptation to dip into the funds too early. This can also help get into better financial habits because you are practicing self-control with regard to your spending, and goal-oriented savings strategies.

You can also try automating your savings account, so you don’t have to put as much effort into it. Regular contributions to your account allow you to save as much as you can over time. Set up your bank so the funds are automatically moved from the checking to the savings account. There are also third-party apps that can do this as well.