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Whether you're buying your first car or you realize that your current vehicle is on its last legs, you will need to start saving. Purchasing a car can be an expensive undertaking, but there are several ways that you can accomplish this goal, step by step.

Step 1: Decide what kind of car you want

The first order of business is to decide what type of car you want to buy. It’s important to be realistic. Is a Maserati really within your budget? (If so, way to go!) Part of deciding what kind of care you want means also deciding whether to buy a used or new car. A new car is going to cost more than a used one, but it may last longer and you will have the peace of mind of knowing that you were its only owner.

Buying a used car is sometimes more of a roll of the dice because most used cars are sold “as-is”, so you pretty much take them as you see them. However, used cars are often much less expensive and you can avoid the major depreciation that occurs during the first year of ownership.

There are many things to consider about what type of vehicle you want to purchase, including:

• The price
• How old it is
• How many miles it has
• Whether it gets good gas mileage
• Whether it will need any repairs soon
• Its overall look and feel

Step 2: Narrow down your options.

Once you have narrowed your search down to a few models you like, you can start to compare car prices by using online tools or looking at your local car dealerships. Compare these prices to the Kelley Blue Book value to make sure you do not overpay.

Step 3: Understand the true cost of the car your purchasing.

If there is a gap between your savings and the cost of the vehicle, you may need to take out a loan for it. You will still want to save up enough for a decent down payment for the vehicle to get a more affordable payment and to be more likely to be qualified for financing options.

If you are going to be financing the vehicle, you will need to factor in additional costs, including loan origination fees, application fees, and the interest rate. You can use online calculators by plugging in certain figures like the interest rate, loan term, and principal to determine what your monthly payment will be. You can also see how a change in the down payment will affect this amount.

Whether you are buying a used car or new, you will also probably have to pay sales tax on your vehicle and fees to register it. Each state is different, but sales tax usually runs between 5 to 11%. In some states, there may be additional local taxes added to this sales tax. Some states do not charge any sales tax and some only charge sales tax if the vehicle is over a certain value, such as $5,000.

And don’t forget registration fees, which usually include your first year’s registration, license plate, and tags.

Budgeting tips for buying a car

Whether you are buying a car outright or trying to save a few thousand dollars for the vehicle, you are going to need to ramp up your savings big time in order to save enough money to purchase the vehicle. Here are some budgeting tips to help you build your savings:

Make your money work for you.

Get a rewards checking account that makes you money. For your primary checking needs Forbes.com recommends that you, “switch to a high-yield reward checking account to earn a significantly higher interest rate.” Most of the time, you won’t pay a monthly maintenance fee, and you’ll earn significantly higher rates than with a regular checking account, which is an overall shift in a positive direction.

Set it – and forget it.

Make the saving process even simpler by making automatic withdrawals from your primary account to the savings account you have set up. You can do this in several ways, such as automatically having your paycheck split up and deposited into your separate accounts or setting up automatic transfers from your primary account to your savings on a particular date or at a certain percentage of your deposit.

Take on some extra work.

You may need to increase your income for a short time to further boost your savings.

You can do this by:

• Asking for extra hours or additional tasks at work
• Becoming a rideshare driver
• Offering online tutoring
• Doing gig work
• Taking on freelance projects
• Taking on a part-time job like waitressing

Cut your expenses.

You may also be able to cut some expenses to further increase your savings. For example, you may be able to make short-term changes, like:

• Limiting unnecessary spending
• Eating at home, rather than at restaurants
• Cutting out cable or streaming services
• Opting for free or cheap entertainment
• Purchasing cheaper groceries
• Negotiating lower rates for your utilities or cell phone bill

Optimize these sacrifices by taking the money you would have used to pay for them and putting that money directly in your savings account.

Sell your current vehicle.

Many places will take an old vehicle off your hands and use it as a trade-in for your current vehicle. Make sure that offer is as close to the current value as your vehicle as possible. If not, you can try to sell your vehicle privately, and use that money toward your down payment or purchase. Some states will give you a credit on your sales tax if this sell and your vehicle purchase occurred near enough in time.

Get creative.

If your savings are still a little short, think of some other ways to save money. Think about how you can do either of these. Some options may be:

• Take in a roommate
• Live somewhere you receive free or discounted room and board, such as being a maintenance worker at an apartment complex or a nanny for a family
• Sell off a collection you have
• Sell unwanted items online
• Take paid surveys online

Keep in mind extra costs

Now that you have saved up enough to purchase your car, your monthly expenses are probably going to go up, so be sure that you continue putting away funds to cover these expenses, like insurance, gas, maintenance, and repairs. You may also have to pay personal property taxes once a year, depending on where you live.

But now that you have shown your commitment to saving, handling your monthly expenses from this point forward should be a breeze. (Much like the breeze you feel riding with the windows down in your sweet new ride!)