I owned my first car, a Dodge Spirit, during my sophomore year at the University of Utah. It cost me around $3,000 and I used savings bonds my Dad purchased me in my childhood to pay for it. At the time, I was excited to finally not be tied down to taking the bus whenever I needed to go somewhere.
Within a couple of years, my started having serious motor problems. I spent several hundred dollars on two separate occasions in an effort to get it fixed. By the time I graduated from college in 2004, my car was on its last legs. It broke down one day while I drove up Parley’s Canyon to visit my Dad. Soon after, I found out the motor was shot and would cost thousands to replace. I needed to buy another car.
The problem is I did not have money to buy a car. Being a college student with a part-time job and tons of student loan debt did not make obtaining a large loan a viable option. I was forced to borrow an old Astrovan that my Dad bought at a surplus car lot for my transportation needs.
From that moment on, I decided I would create a special car fund to help me pay for repairs and save up money to buy a better car. In 2005, I opened a new money market account at my local credit union. I labeled the account “Car Fund” and made it a goal to make deposits into the account every time I got paid.
My deposits were not a significant sum. On each paycheck I received, I simply rounded down to the nearest zero and deposited those few leftover dollars into my newly created car fund. I took out as much as I could live without and counted on the money adding up over time. If I received a check for $360 and had $295.20 left after taxes, I would take out $5.20 and stick it in the car fund. I did this on every check large or small. If I was paid a larger amount, I rounded off a larger sum. For smaller sums, I deposited smaller amounts. The key was I kept making deposits.
My plan was much more successful than I originally envisioned. Within a few months, my car fund account grew from just a few dollars to several hundred. The balance soon reached $3000 within three years of opening the account.
This car fund proved to be a lifesaver when it came time to replace the van. My job as a sports reporter required me to travel all over Utah and I literally racked up $400 to $500 in gasoline costs each month. I did receive some reimbursements, but ate much of the cost myself. I decided paying a monthly car payment would actually be less expensive.
I found a 2004 Chevrolet Impala with low mileage to purchase for $8,200. Registration and licensing fees added an additional $600 My next task was securing an auto loan to pay for it. The credit union loan officer expressed reluctance at approving a loan initially, until I revealed that I had enough to make $2,200 down payment to reduce the initial cost to $6,000. My loan was approved for $6,000. I bought the Impala and immediately shaved several hundred dollars off my monthly gas costs.
I have kept my car fund intact since that time and it offers a nice resource when I need to finance a car repair or make a loan payment. Setting aside a few dollars each month has made all the difference in the world. 3 ½ years after buying that car, I have paid off nearly 75 percent of my original auto loan.
Creating your own car fund and making regular deposits is worth it down the road. Make it a part of your monthly budget. Deposits can draw a small sum from each check – anywhere from 1 to 5 percent – that you can live without for that month. It takes only a short time to build a financial cushion that is there for you when you need to make car repairs or replace your car altogether.