How to Save Money for a Car

The car you really want may be closer than you think.


Getting the car that’s right for you starts long before the test drive. It starts with planning how you’ll pay for it. So you’ll want to know how to save up for a car.

Planning to buy a new car can be a big decision. Maybe you just need something to take you from point A to point B. Perhaps you want a new unofficial team bus for all those soccer tournaments or you just want that convertible you’ve always dreamed of so you can feel the wind in your hair. Whatever has put you in the market for a new set of wheels, you have a lot to consider.

When it comes to making large purchases, taking time to save can really put you in the driver's seat. This is especially true when it comes to car buying. Planning ahead may help you negotiate and drive away happy.

Decide what you want to spend

When you know what you’re willing to spend, it becomes simpler to know how to save for a car. You don’t have to do the math on your own. Use a saving for a car calculator to understand how much time it will take.

Start by being realistic about what you want to spend on a new car—or a used car that’s new to you. You should also consider whether you want to pay for it in full, make a down payment or get an auto loan. Saving $20,000, $30,000 or more for a new car may seem like a stretch. So financing part of the purchase might make more sense for you. Though with current interest rates over 4%,1 you could save thousands of dollars if you pay at least 20% down on a new car.

Remember, you have options that can help as you’re saving to buy a car. you can use your current car as a trade-in. Plus, dealers often have rebates and discounts, so keep your eyes open for deals on the car you want.

Plan how much you can save for a car

How much you want to spend on a new car could depend on how much you’re saving for a car down payment. To understand how much to save for a car, take a look at your budget and divide it into categories. You could think about it in terms of a 50/20/30 guideline2.

  • 50% to fixed costs.Fixed costs include housing (whether you rent or own), utility bills, car payments and subscriptions. It’s all the things that you have to pay every month—yes, that includes the kids’ music lessons.

  • 20% to your future.Your future isn’t just saving for retirement. It’s also paying off any credit cards, student loans, medical bills or other debts.

  • 30% to flexible spending.Flexible spending is everything else, from the daily stop at your favorite coffee shop to gas to that trip to Spain you’ve always wanted.

To find the best way to save for a car for your budget, consider the 50 and 30 areas. If you’re spending 40% of your income on your fixed costs, that leaves you 10% that you could save. If you're having a hard time imagining how the 50/20/30 rule applies to you, an example might help illustrate the point.

Linda lives in Texas. She has net income of $4,000 a month. She spends $1,465 on her fixed costs. Rent = $641 Car payment = $479 Car insurance = $135 Utilities (including cell phone) = $210

That’s 37%. She could be saving $535 a month toward her new car and still be within the 50% for her fixed costs. That could be a pretty good start to her car savings account.

It could take several years to save $30,000 to pay for a new car without taking out a loan. When you know what you can save and how to budget you can really determine what’s best for you as you’re saving money for a car.

Get creative with your budget

After you’ve looked at your budget, and decided what you want to spend, you can look for additional ways to earn more or make your budget stretch further.

There are tons of ways you could “find” money you never expected. And that found money could help you determine how to save for a car quickly.

  • Carpool to save on gas and maintenance
  • Cook more and eat out less (especially helpful if you plan meals around the grocery store flyer)
  • Find a side hustle that puts more money in your wallet
  • Try free yoga in the park to save on that gym membership
  • Grow your own food in a garden
  • Go to the library (they have books, CDs, DVDs, classes and all sorts of free entertainment)
  • Have a garage sale (you’ve wanted to clean out the closets forever anyway)
  • Take your lunch to work
  • Use your car to earn for a new car—deliveries, Uber, Lyft, etc.
     

Look around and you’ll think of many more ways you can save money while having fun. You can also find lots more tips for saving up for a car, and a variety of savings hacks to help you do more with your budget.

Commit to saving for a car

Congratulations! You’ve decided how much you want to start saving for a car. When you have your goal set, open a savings account. Opening it is just the start. You’ll probably want to make regular contributions so that you can get your dream car sooner rather than later.

How much and how often you put money into your savings account will depend on how soon you want the new car. Obviously, the sooner you want it, the more quickly you’ll need to save the money. Since it’s based on your budget, you’re in control of the timing.

Be patient. You know the car you want and when you want it. So stay committed to your car savings account. To make the commitment easier for you, you can deposit part of each paycheck into your savings account directly. Or you can automate transfers from your checking account into your savings account. You’ll be saving the money you want, and by putting it into a separate account, you’ll avoid the temptation to use that money for other things.

Keep saving for maintenance

Once you make the purchase, you’ll want to make sure you take care of it.

There will be regular oil changes, tire rotations, brake services and lots of fuel costs as you enjoy life behind the wheel of your new ride. Sticking to your savings commitment could help cover the costs more easily. And just like there are lots of ways to stretch your budget, you won’t believe how simple it can be to follow a few tips and save on the cost of car ownership.

Simply asking yourself how much you want to spend on a new car and when you want it is the first step toward getting the car of your dreams. Before you know it, you’ll have a new (and still unofficial) soccer team bus. Just remind them not to put their muddy cleats on the new seats.


This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

  1. “Current Auto Interest Rates.” Bankrate.com. Retrieved from: https://www.bankrate.com/loans/auto-loans/current-auto-loan-interest-rates/

  2. Pant, P. (2018, February 4). “The 50/30/20 Rule of Thumb for Budgeting.” thebalance.com. Retrieved from: https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

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