Having a car is no longer a luxury. You need it for your daily errands like shuttling your kids to school, going to the grocery store, or commuting to your workplace. You might have endless reasons to own a car. Unfortunately, it is the largest purchase after buying a house.
Being able to pay the entire cost of the car out of your pocket is not a breeze. If you are looking to take out a loan to buy your car, you will have to arrange a down payment. Technically, you should have at least 10% of the sticker price of your car, but a few lenders would like you to deposit more money especially, if you are applying for bad credit car finance in Ireland.
You need months to be able to stash upfront cost of the car. It is not plain sailing to arrange the deposit for your car. Here are the tips you should follow if you are creating a budget for your car purchase:
- How much your budget allows you to set aside
Before you start putting in money, the first thing you need to determine is how much your budget allows you to set for the down payment on your car. Take stock of your income and expenses and see how much you are left with after meeting all of your expenses.
Whether or not you are left with a surplus, you should try to check out the ways to whittle down your expenses. The more money you cut back, the faster you will arrange the down payment.
- Find out what car you will buy
Based on your budget, you will be able to buy your car. The size of the down payment actually depends on the value of your car. A secondhand car will be cheaper than a new car, but you will have to weigh up your options carefully.
If you finance a used car, you will end up paying much more money than the total price of the car because of interest. If the car is financed for a longer period, you will lose great value due to depreciation, which means by the time you own your car, the market value of your car will be very low, probably a salvage value.
If you decide to buy your used car for cash, you can escape interest payments. But it will cost you high maintenance. Insurance costs will not be much if you are buying an old car. However, this will be too high for a new car.
- Opt for safer investments to double your money
If you are looking to buy a new car, which will cost you more than an old car, you will need to arrange a bigger deposit. It is not a cinch to have enough money set aside, especially if you are looking to take out loans for bad credit.
If your budget does not have the potential to stow away a larger chunk every month, you should try to invest that money. Gain some knowledge about the stock market and try to invest some of your money in order to receive dividends.
Another appealing way to increase your savings without taking on too much risk is fixed deposit. You should buy a fixed deposit using the money you have already saved. Since you will not have access to this money very soon, you will likely get a handsome interest rate.
The longer the deposit period, the higher the interest rate will be. Ask your bank what interest rates they have to offer you before buying the fixed deposit. Compare them with the rates of other banks as well.
- Save money on the car loan
Budgeting does not finish as you have successfully arranged the down payment on your car. A real challenge begins when you start applying for a car loan. You will have different deals to choose from. In recent times, it has been seen that many people are opting for longer repayment terms, probably more than six years.
A longer repayment period will make it difficult for you to lower the size of monthly instalments, but you will end up paying too much in total. You should try to choose a smaller repayment length so you can save a lot of money on interest payments.
As your interest rate has a direct link to your credit score, make sure your credit file is not too bad. Compare interest rates and APRs so you can choose the most affordable deal. Although you can get a loan despite a bad from credit score money lenders in Ireland, your credit score should not be less than the fair credit score range.
- Have a side gig
You should increase your income so you can quickly arrange the down payment on your car. When you have additional cash coming in, you can use it as savings for your car. An extra supply of cash will also help you easily manage your car loan repayments.
Make sure to have a side gig that fits into your schedule. Do not opt for any job that hinders your full-time job. As your focus is to be able to increase the supply of cash to increase the deposit size, you do not need to be particular about the side hustle. It can be any job that you think you can do. In fact, walking a dog will also come in handy.
The bottom line
Making a budget for your car purchase is not a breeze, but there are ways how you can successfully manage to do so. You should try to figure out how much your pocket allows you to set aside. Try to get a side gig so you can quickly grow your down payment. Then, try to invest your money in safer investment plans like a fixed deposit. It is way better than keeping your savings idle. You should also try to save money on the car loan. Opt for a smaller repayment length than the longer one and choose lower interest rates and APRs.