A couple years ago, it wasn’t uncommon to speculate about an era without personal vehicles.
Ride-sharing businesses were soaring, eco-friendly public transportation initiatives were being discussed in more major cities around the world, and it was becoming almost trendy to muse about giving up your car and the expenses that come with it.
A future like that may still come to pass. It could be that in time, public transportation and autonomous ride sharing are clean, cheap, and popular enough to manage our day-to-day transportation needs for us. But as of 2020, this conversation has actually turned around somewhat.
Our report ‘Car Importance Now Greatest’ revealed that more than half of UK drivers (57%) consider access to a car more important than it was before the pandemic. This is due to a certain unease with public transportation, which may persist for a long while even once the pandemic is under control.
Additionally, electric vehicles appear to be catching on at last. Despite years’ worth of stories about the UK’s reluctance to adopt EVs (due to high costs), Clean Technica reports that sales are “blowing up” in 2020, with EVs now accounting for roughly 10% of auto sales nationwide.
So, altogether we have more UK drivers valuing access to cars, more distrust in public transportation, and an increasingly popular EV market emerging. This all suggests that more people will be looking to purchase new cars in the coming years than we would have predicted fairly recently, and for that reason we wanted to suggest a few tips for how to start saving and investing for a new car purchase of your own.
Buy Into an Index Fund
An index fund is a popular option among investors, and can be particularly suitable if you want to invest for a specific purpose. For those who aren’t familiar, an index fund is essentially a pre-packaged bundle of diversified assets that are traded together as a single entity. These funds function almost like professionally managed portfolios like mutual funds, but give traders easy flexibility to buy in and cash out as needed.
Essentially this amounts to a relatively easy way of engaging in strategic market trading on your own terms. There is of course no guarantee that an index will appreciate as you want it to; any investment comes with risk. But if you’re investing for a specific purpose, like a new car purchase in the next year, it can be a simple venture with a decent probability of short-term gains.
Learn the Forex Trade
The forex trade is a little more involved than an index fund. This is the worldwide market in which currencies are traded against one another, and it is generally a very busy environment. High-end forex traders deal in large amounts of money in order to capitalise meaningfully on even small shifts in currency values. However, it’s also a market you can trade in with smaller amounts, as well as one you can learn fairly quickly and manage on your own time.
This is true largely thanks to the online and mobile tools that have made the forex trade more accessible in recent years. FXCM describes these modern trading platforms as being able to “cater to the needs of the individual trader, regardless of experience level or trading style,” and that’s a fairly good way to put it. Forex is now something you can approach on your terms, with your own priorities and methods. So, while here too there are no guarantees, it’s a market you can engage in as a sort of side project in the hopes of earning enough returns to offset the costs of your new car.
Open High-Yield Savings Accounts
Another option if you know you’re going to be buying a car and you’d just like to set up a small financial boost between now and when you start making payments is to simply put some money into high-yield savings accounts. These accounts can vary in their specific approaches and interest rates (and in the UK specifically a Certificate of Deposit is a popular alternative), but the basic benefit is always the same. As CNBC puts it, a high-yield savings account will grow at a faster rate than a traditional one.
The “con” to opening high-yield savings accounts is basically that they’re not the most efficient ways to save. People working on long-term financial plans might do better to put their money elsewhere. But if you’re looking for a stable way to generate a modest amount that will help with a car purchase in the next year or two, it’s an option worth considering.
Hopefully this has helped you to start thinking about how you might pay for your next new car! If you’re among those throughout the UK who are giving this idea more consideration, we wish you luck with the purchase.