by Dale Dolmo

Created on: October 04, 2010   Last Updated: May 08, 2012

If you purchase your next car with dealer financing, rest assured that the dealer and finance company will work out a plan that's the most beneficial for them, not for you. Even if you get your own financing through your bank or credit union, a five year car loan could end up costing you nearly $3,000 dollars in interest for a $15,000 car! With some planning and discipline, you can "finance" your car with savings instead of debt. Just remember that saving for a purchase as big as this is a marathon and not a sprint. The sooner you get started, the sooner you'll be crossing the finish line.

Start your savings engine.
Of course, you'll want to eliminate any high interest debt you have, so that you can put more of your income toward saving for your goal. Set up a savings account just for your car-buying goal. Ally is an online bank with a good rate for savings, but any bank or credit union that lets you set up automatic deposits will do. Schedule deposits for every time you get paid. Figure out how much you think you can comfortably contribute, then add a few dollars onto that. People tend to underestimate how much they can afford to put into savings. You'll find that once that money is "automatically" gone from your checking account, you simply adjust your spending habits to account for not having that "extra" to spend.

Once you've built up some savings, you might want to look into Certificates of Deposit (CDs), as they can pay somewhat higher interest than a regular savings account. Keep in mind, however, that the difference between the interest rates on CDs and those on savings accounts may not be all that great, depending on the bank you're using. Also, CDs typically tie up your money for a specified time period, whereas you have access to your funds anytime with a savings or money market account. The best rates on CDs usually come with the longest terms (5 or 10 years), and that may not be practical for you.

Cut expenses - thoughtfully.
Obviously, the less you spend on other things, the more you can put towards your savings plan. Do you really need that expanded cable or satellite package, or will the basic package keep you entertained? Could you get by with a simple prepaid mobile phone, instead of the latest smartphone on an expensive contract? Don't rush to slash everything, however. Cutting out little things that make you happy can leave you feeling deprived, which could make you resent - and ultimately abandon - your savings plan. If taking your

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