Purchasing one's first car is a significant achievement for many people. It carries sentimental value in addition to a sense of independence and responsibility.
Irrespective of the model or condition, a great-functioning car can be pricey.
If you don't have enough cash on hand to make an instant purchase, you may be researching your financing alternatives. For instance, saving enough money to pay in cash or making a 50% down payment for an auto loan.
The trick to saving is to create a realistic, all-inclusive budget that factors in the exact car price and the extras. For example, you might have to wiggle room for all associated car costs such as auto insurance, import duty, NTSA processing fees, inspection, and licensing.
Here are some key steps when saving for your first car.
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Being your very first car, you need to become more familiar with the many options in the market.
You might want anything with four wheels since you're so excited, but that won't work. Instead, give important aspects like your budget and transportation demands some thought. Extensive research will also help you in determining fuel efficiency and car depreciation.
Your lifestyle is also a vital determinant of the most appropriate vehicle. For example, you may not want big, spacious, family-size models if you are single and without kids. But you may still find a use for a bigger car even if you do not have a family yet.
You probably don't really want to obsess over those sleek luxury cars if your budget is modest. Since this is just your first car, and there will be many more, go with something manageable for your budget.
Consider the pros and cons of buying a new or used car. A new car would be great as a status symbol. It's also reliable and has a warranty if anything ever goes wrong. However, it may be expensive, and you might incur a huge debt, especially if you buy it using an auto loan. A new car might also have a more significant insurance premium than a used one.
How much should you save for your first car? The smart move is to factor in various aspects that make the total cost of the of your choice: The math might include:
Calculating your car's depreciation helps determine the actual car price. Go with the
mileage on the odometer and full-service history as a guide as you compute the depreciation. And suppose you identify a model with an asking price of Ksh1 million. Factor in not just the price but the interest rate in case of a car loan and car registration costs.
The time factor plays a critical role in how you save for your car. If you quickly require the vehicle, you might have to tighten your belt and save a considerable percentage within the shortest time possible. While it's doable, it can also be stressful and may interfere with other financial goals.
Lenders can also look at your credit score before giving you a loan offer. So in the meantime, steer clear of unnecessary borrowing and purchases.
What if it's a long-term car savings plan? Say you want to buy your car in the next 2 or 3 years.
Then time is on your side, and you can start early. It means you create ingenious ways to save.
That exclusive car account might be what you need. Design your budget to include your new goal and reduce unnecessary expenditures to create room for your savings.
Read Also: 10 Signs You Are Not Ready to be a Car Owner
A non-negotiable car savings goal requires some extra dose of dedication and discipline. The trick would be to open a fixed car savings account.
With a designated fund, you do not have easy access to savings. Let your savings goal aim to achieve the required down payment. It would be wise to stay within the exact amount because of the additional car-related expenses.
Some of the savings strategies include making regular deposits into your account. It could be weekly or monthly, so long as you stick to the routine to meet your target. A high-yielding savings account can also fetch you interest, boosting your car savings account.
It pays big for you to be ready whenever you want to purchase your first car. Even if you give yourself a few years to the goal, starting early to save gives you the confidence to keep going.
Soon you might see that your plan is achievable. Starting to save early is also a strategic way to boost your car-buying account with compound interest. Think of how you earn interest on your regular savings, which might give you a bigger balance by the time you purchase your first car.
Usually, the asking price for some cars is flexible, and you can bargain for a lower price. It's even easier for an individual car seller or dealer to slash the cost of a used car based on mileage and its service and maintenance history. If you notice an anomaly, however small, you can still negotiate with the dealer to scale down the costs.
Read Also: The 7 Hidden Costs of Car Ownership in Kenya
A car is among the necessities for many Kenyans. It's an essential means of transport to work, business, and running errands. Before you can begin with savings, research the type of car that meets your needs and budget. Research also the available financing options to get the right one. And lastly, have a clear car savings goal; go for the precise numbers and create a savings target to help you buy the right car.