How to Save for a Car: 7 Strategies That Can Help

For many people, buying a car takes some financial planning. Here's a look at how to save for a car, as well as strategies to jump-start your progress.

Sarah Brodsky | 

Mar 2, 2022 | 5 min read

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For many people, buying a car takes some financial planning. Even if you're getting a loan to cover a large share of the sticker price, you'll likely still have a down payment to cover and other out-of-pocket expenses to pay before you can drive your vehicle off the lot.

Everyone's needs are different, so your target savings and timeline might not be the same as the next person's. However, if you're wondering how to save for a car, the following seven strategies can apply to most situations.

1. Write Down Your Savings Goal

To begin, it's wise to establish how much you need to save. You'll likely want to save at least enough to make a sizable down payment on your vehicle, as this can help reduce the size of your loan.

If you're purchasing a new car, you may want to aim for a down payment of 20% to reduce your chances of being upside down on the loan in a year or two. For a used car, it's typical to make a down payment of around 10%.

Once you've come up with the number you want, write it down. Seeing the amount in print might help jump-start your car savings goals.

2. Prepare for Additional Expenses

Keep in mind there are several costs that go with buying a car, including insurance, title and registration fees, delivery costs, and sales tax. If you're buying a used car, you'll probably also want to pay for an inspection before you close the deal.

Once you start driving your new vehicle, you'll incur costs related to gas, parking, and maintenance. While you don't necessarily need to save up for every ongoing expense ahead of time, it's a good idea to estimate how much they'll be so you can tweak your savings goal if needed. For example, you might want to save enough to pay for the first tank of gas and a parking pass.

You may want to incorporate these costs into your vehicle savings goal so that you're prepared to cover them when the time comes.

3. Create a Budget

It's important to review your finances to see how much money you have available to save each month. Start with your after-tax income and subtract what you need for your rent or mortgage, food, transportation, insurance, utilities, health care, and other living costs. Also, subtract payments on student loans, credit cards, and other debts you may have. Finally, deduct any money you set aside for savings goals, like retirement.

Now, look at the amount that's left over. You may want to dedicate all (or part) to saving for your car.

4. Put Your Savings in a Designated Account

It might be helpful to open a separate savings account or sub-savings account just for your upcoming car purchase. This can make it easier to track your progress, as you can simply check the account balance whenever you want to see where you stand. Keeping your car savings apart from the rest of your funds can help reduce the temptation to dip into the money before you reach your goal.

5. Make Saving Automatic

You may be more likely to save regularly if you don't have to remember to take action, so consider adding to the funds in your savings account automatically. You could arrange to deposit a portion of each paycheck into the account or have your bank transfer money once a month. There are also apps you can use to automatically transfer a little bit of change to your savings each time you make a purchase.

This way, you could see your savings grow without having to dedicate as much time to transfers and deposits. It might help you reach your goal faster, too.

6. Break Your Goal Into Smaller Steps

If you're feeling overwhelmed by the amount you plan to save, try picturing it on a smaller scale.

Suppose you want to save $2,500 over 10 months. That may appear to be a challenge at first, but if you think of it as $250 per month, it may seem more manageable. You could even divide it up by days. In a typical 30-day month, you can get to $250 in savings if you set aside a little over $8.33 per day. You might find that you're currently spending $8.33 each day on discretionary things, like lunches out or entertainment, and that you could reroute some of that spending toward your goal.

It's possible you might feel your goal is still out of reach even when you break it down by months, weeks, or days. In that case, it may be best to revisit your goal and check if it's actually realistic for you. Some options are to set your sights on a less expensive car or to give yourself more time to accumulate savings.

7. Hit Pause and Think About Spending Trade-Offs

If saving is a struggle because you're spending money soon after you earn it, give yourself a cooling-off period. A helpful tactic is planning to go shopping just one day a week. If you wait a few days to make a purchase, you may no longer want it by the time your shopping day rolls around.

And before you buy any optional stuff, review your car savings progress. See how much you've saved in the past few weeks, and check how far you have to go. Then, consider whether discretionary items are really worth it or if you'd rather put the money toward your next car instead.

Different strategies may work for different people, so keep your individual situation in mind when considering the strategies above regarding how to save for a car.

Sarah Brodsky

I’m a writer with over a decade of experience focusing on money. I’ve written for banks and personal finance websites, and I’ve covered all kinds of financial topics, from auto loans to credit scores. My goal is to break down the details of complex decisions so they’re easy to understand. I’m excited to share what I’ve learned with consumers as they compare their options and get started with financing their next car.