It’s not often that a college student has enough money to afford a dream car. As a student, you have to juggle tuition, rent, books, food, and other daily expenses. In fact, just having enough money in your checking account to cover everyday expenses is a big achievement for many students.

Still, buying the car you want is not impossible.

The goal of buying a dream car while you are still in college should be treated as a financial project. The budget, the timeline, and the patience required to make the right decision will all be rewarded with a dream car that actually improves your life instead of putting you in a financial bind.

Here’s how you can start to save up to buy the right car while in college.

Decide What “Dream Car” Actually Means

It doesn’t have to be a costly, luxurious sports car. All you need is a reliable car that is suitable for you, looks good, handles well and enables you to travel freely. It should not be a source of problems for you.

Start by defining exactly what you want.

Take time to consider all models on the market and price them out. Look for new, used and certified pre-owned models to compare prices. A 2-3 year old model can have all the same features of a brand new model for a lower price.

Good fuel economy, safety features and low-cost servicing may be more important to you than hi-fi speakers or expensive leather interiors. Consider your priorities.

Clear priorities make it easier to avoid overspending.

Calculate the True Cost of Car Ownership

Owning a car costs more than the price of the car. Many students only consider the monthly payment when they are considering purchasing a car. The other costs of owning a car can add up throughout the year.

Your budget should include:

The down payment
Monthly loan payments
Auto insurance
Fuel
Registration fees
Routine maintenance
Parking
Repairs
Tires
Taxes and dealership fees

For young drivers, insurance can be particularly expensive. The cost of insurance can vary depending on the driver’s age, location, driving record, vehicle and level of cover.

By looking into several car insurance rates prior to choosing a car, you will get an idea of how expensive a car’s rate can be when it is parked in your driveway and you drive it. And with all of the new car costs such as fuel and maybe additional payments such as registration, the rate of your new car could possibly cost so much more after buying the car than you originally thought.

Build a Separate Car Savings Fund

Separate your car money from your everyday spending money by putting it in a savings account, which can be set up as a separate account for your car savings goal.

Label the account for saving for your car. Make it specific, for example, “Car Fund” or “Future Vehicle”. This helps make the savings goal specific and thus attainable.

Automatic transfers from your checking account to your car savings account add up over time. Even saving $40 per week will add up to over $2,000 by the end of the year.

Rather, your funds will automatically transfer to your Car Fund before you can even think about how to spend that hard-earned cash elsewhere.

Even if your income is variable from month to month, you can set your savings up to handle it by setting the amount of your monthly savings to a smaller amount and then adding in as much as you can as the months go by.

Create a Realistic Timeline

You have to be able to make it fit your income, though. For example, if you want to save up $4,000 towards a down payment on a $18,000 car within 2 years, that is roughly $167/month until you reach your goal, not counting any interest you might earn off of the funds.

Assuming the car will cost $18,000 and you plan to put down $4,000, in two years you will have built up a car fund worth $167/month (not including interest that may have accrued).

That may be manageable for some students and difficult for others.

If you think that you are saving too much each month, consider extending the time frame in which you save for your car goal, look for cheaper cars, or increase your amount of income. Do not try to fill the gap between what you can afford to save and what you need to save in order to make your car payments by getting into debt at high interest rates.

A slower plan is often better than a rushed purchase.

Reduce the Expenses That Do Not Matter Much

Saving for big goals does not have to mean giving up all of your favorite activities and events. It’s about finding the expenses that don’t bring much value in the long run and cutting back on them.

Go through your last two to three months of bank statements and evaluate your current subscriptions and recurring expenses for services such as streaming services, clubs, and restaurants, food delivery services, apps, and monthly fees for services that you can put on hold or cancel.

Then choose a few expenses to reduce.

You don’t have to quit hanging out with your friends or buying your morning coffee on the way to class. Just realize that for the most part you’re spending money because it’s easy to do, not because it’s particularly important to you.

Eating lunch at home instead of at a restaurant three times a week will save enough money for several months of savings. Likewise, canceling two unused subscriptions will add another $20-$30 to monthly savings.

Small changes are easier to maintain when they are connected to a specific goal.

Manage Existing Debt Before Taking on an Auto Loan

When you are looking for an auto loan, you have to take into account the other financial obligations you have. These can include credit card debts, personal loans, and also the payments for your student loans.

How credit card debt, personal loans, and student loans affect your ability to afford an auto loan.

Refinancing student loans has become increasingly common, especially amongst graduates who seek to alter interest rates or the terms of repayment of existing loans. Often, however, these loans are refinanced by graduates through private lenders of student loans to take advantage of lower interest rates offered by these institutions. 

When you apply for an auto loan, the lender will determine an amount that you can afford to repay, based on the information that you provide in your application. This does not necessarily mean that the repayment amount will feel comfortable when paying for groceries, rent, utilities and dealing with emergencies, etc.

Improve Your Credit Before You Shop

In addition, your credit history can affect your auto loan rate. Building a good credit history can qualify you for the lowest possible rate on your car loan, meaning you can pay less over the life of the loan, even at the same monthly payment amount.

First, check for errors on your credit reports. Then, make sure to pay all your bills on time. Also, keep the balance on your credit cards as low as possible. Lastly, try not to apply for too many credit accounts within a short period of time.

When there is little to no credit history, building good credit takes time, so establishing credit as soon as possible is a good idea. Consider a secured credit card, or become an authorized user on a responsible account holder’s account.

Carrying a balance on a credit card just to build up a positive payment history (a ‘good credit history’) is not required and will, in fact, cost you in terms of interest charged.

Building good credit habits during your time of owning and paying for a car will pay off long after you have bought and paid for the car.

Final Thoughts

Buying a car in college requires financial discipline but not perfect finances. There is a car out there for everyone if they set a goal and create a plan to save for the car.

Remember to check your credit report, manage your current debts and research the best financing options offered by the car dealer.

Most importantly, avoid rushing.

The right car for you will be one that you can enjoy without compromising on rent, food, or even emergency funds and future savings goals. If you have prepared for buying a car in advance, buying a car can become more than just an exciting purchase – it can actually prove that you can set and achieve a financial goal.