How to Afford Your Dream Car

Some cars are just exciting. Whether it’s the thrill of more horsepower or the promise of a more luxurious ride, most of us have a car that seems to call our name.

Unfortunately, sometimes it feels like our dream cars are out of reach. Often, that isn’t true! Your ideal ride could be a lot closer than you think.

7 Tips for Buying Your Dream Car

Like any goal, buying your dream car comes down to making a plan. Here are seven steps you can take to put yourself in a sweet ride.

1. Get Specific With Your Dream

Also consider whether you want a special edition or certain features not included on the base model. Case in point: recent search on AutoTrader revealed that a 2016 Dodge Viper ACR last went for $235,000, but a used 2004 Dodge Viper SRT-10 goes for around $56,800. 

So, if you’re planning to buy the Viper ACR in 3 years, you’ll need to save a lot more per month than you would to buy the SRT-10. 

Once you know the exact car you’re looking for, you can use tools like Kelley Blue Book to find out how much your car might cost. (You may need to use more specialized websites to find the cost of exotic cars like the Viper ACR.)

2. Find the True Cost of Your Dream Car

When it comes to cars, there’s the sticker price and then there’s the true cost of car ownership — fuel, insurance, seasonal maintenance, and so on. Some cars are just going to be more expensive. 

For instance, the Vipers we mentioned above are both described as “gas guzzlers,” so if that’s your dream car then you’ll need to factor in higher fuel costs. Similarly, many exotic cars and high-end sports cars require more routine maintenance, so you’ll have to include those costs into your budget. 

3. Decide What Compromises You’ll Make

Once you’ve settled on the car you want and found its price, the next step is to decide how much you should spend on a car. On average, you’ll spend the next three to seven years paying on your car — possibly longer if your dream car is really unique. Remember, the more you pay on your car, the less you’ll have to spend on other things like food, rent or mortgage payments, and entertainment.

Once you crunch the numbers, you may decide your dream car is out of reach. If so, think about any compromises you’d be willing to make. For instance, maybe you would settle for:

• A used car instead of new

• Nylon seats instead of leather

• A base model instead of a limited edition 

• A car you restore yourself

Compromising doesn’t sound like fun, but it can bring your dreams closer to becoming reality. Losing a few extras here and there will bring down the price, and you may not even miss them. Think about what you really want from your dream car and prioritize those features that will make your dream come true.

For example, if what you really want from your new car is a great driving experience, then sacrificing a reverse camera won’t take away from your enjoyment of the car. But if your dream car is all about a safer ride for your family, then that camera might be important to fulfilling your dream. 

4. Research Financing Options

Traditional auto loans are usually the best way to finance a car. That’s because they have:

• Lower, fixed interest rates than other loans

• An easier approval process

• Fixed terms that make them easier to pay off 

However, many lenders won’t finance cars over 10 years old or with over 100,000 miles. That means if your dream car is a classic, you might have to find a special lender for classic cars. Another option would be to use a personal loan instead of an auto loan.

Similarly, exotic cars (sometimes called supercars or hypercars) cost more than the amount most lenders offer for auto loans. If your dream car is from a brand like Lamborghini, Ferrari, or Rolls-Royce, then you may have to find a lender who specializes in exotic car financing and can offer you a higher loan amount and longer term to pay it back.

Another popular option is to use captive financing, a process of financing a car directly through the manufacturer. While anyone can apply for captive financing, if you’re buying a high-end model then you may have to jump through some hoops. For instance, Ferrari will only let you apply to finance an exotic car if you’ve bought a few Ferraris before. Each manufacturer sets their own rules about who qualifies for captive financing.

5. Improve Your Credit Score

Getting a deal on a car can be tough, but it’s much easier when you have good credit. Interest rates on auto loans can be more than twice as high for those with poorer credit. And if you’re interested in a classic or exotic model, you’ll need a much higher score to qualify for financing — at least a 740 credit score or better. 

If your credit score isn’t as high as it needs to be, start early taking steps to improve your credit score. It can take six months or more of regular, full, on-time payments to see positive changes to your credit. You can be smart about your debt and create a great payment history that will inspire trust in lenders. 

6. Improve Your Chances of Qualifying

In addition to a higher credit score, lenders will consider a few other factors. Often, they want to see that you have:

• A large enough income to pay off your loan

• A low debt-to-income ratio

• A down payment 

The average cost of a new car in 2021 was $42,380. Qualifying for an auto loan isn’t hard if your dream car costs around that or less. But if you’re planning on something more expensive, you might have to meet additional criteria to qualify.

Many high-end lenders want to see that you’ve managed a large car loan before. The amount you request for your dream car should be within 50% of the amount you’ve borrowed before.

Another consideration is the loan-to-value ratio, or the dollar value of your loan compared to the actual value of your car. New cars depreciate by 20% after the first year and 10% each year after, while used cars depreciate more slowly. While classic and exotic cars usually gain value over time, that’s not a guarantee because their value is often based on trends in collecting.

Most lenders like to see borrowers make a down payment. A traditional down payment is 20%, though people have been making smaller down payments of 5% or 10% in more recent years. Keep in mind that the larger your down payment, the less you’ll have to borrow and the sooner you’ll pay off your loan.

7. Save, Save, Save

Whether your dream car is a popular model or something a little more unusual, you’ll need to save to buy it. A savings account is a great way to do that, but there are also other savings options that might help you save faster.

One of the best ways to hit your savings goal for your dream car is to create a personal budget and include a line item for your savings. A budget will ensure all your essentials are covered and that you save regularly toward your goal.

The Takeaway

Buying your dream car might feel like just that — a dream. But with a little motivation and planning, you can find yourself cruising around in that car sooner than you think.