Down payments and trade equity are two valuable ways to make your car-buying process smooth when it comes to finances. Every single person has a budget. Rich or poor, we all want to get the best value for our dollar, right? To do that, it's best to have good trade equity or more down payment.
If you are in the market for buying a car in the next few months or year, we encourage you to take these five steps to build up your down payment! Remember, the bigger your down payment is, the lower your monthly payment will be!
1. Cut a Major Expense. Take a look at your budget and asses what your biggest manageable expenses are and trying cutting back on them. Is your cable bill costing you $100 or more a month? Do you still have a landline? There are many alternatives to cable these days that are much more affordable. For example, my husband (David Rath) and I haven't had cable since we have been married in 2011. We pay monthly for Netflix and haven't looked back. You can also buy a digital antenna that gets you a few channels too. We have one that we keep just in case we need it during tornado season! If you have a sports lover in your house that needs to watch the games, try watching at friends houses or renting them on the Xbox through the NFL Game Pass.
2. Manage Smaller Expenses. For example, you might be surprised how fast those Starbucks trips or Monster energy drinks from the gas station are adding up to your monthly expenses. If you have a daily habit like that, try going every other day or buying drinks in bulk at places like Sam's Club.
3. Set aside a specific amount from your paycheck each month. I know it sounds obvious, but try taking a portion of your paycheck each month and immediately put it into your savings account...and don't touch it! If you take $50 from a weekly paycheck and put into savings, that is $1200 toward a down payment in 6 months. You would be surprised how beneficial that is for you!
4. Think before you buy! Before you purchase that new PlayStation game, the new Michael Kors wallet or go on a Bath and Body Works shopping spree, think about what you want more? A new car that is a long-term investment and will likely bring you happiness or ease of mind knowing you are in a safe and reliable vehicle that far outlasts the joy of smaller objects that could cut into your new-car down payment budget!
5. Get Digit - a free app that saves money, without thinking about it. "To use Digit, you need to connect your checking account. This allows Digit to analyze your income and spending, and find money it can safely set aside for you. Every day, Digit tries to move some money from your checking account to your Digit account. Digit never transfers more than you can afford, so you don't have to worry about over-drafting your account. In fact, we have a no-overdraft guarantee."