How To Save Up for a Car: What You Need To Know

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With the average monthly car payment now $712 according to Moody Analytics,  saving for a car, or at least a reasonable down payment, is often necessary to get into an affordable vehicle. Before you begin auto shopping, you need to determine how much you need to save for a down payment. Here is how to save for a car in three simple steps.

  1. Determine your monthly car spend
  2. Calculate how much of a down payment you’ll need
  3. Save your down payment

How To Save for a Car That Fits Your Budget

Figuring out how much you can afford and how much of a down payment you’ll need to save will take some research and a bit of number crunching. However, it is an important step that can make the difference between a car that fits your budget and one that breaks your budget.

1. Determine Your Monthly Car Spend

With a vehicle, the monthly cost will be more than just the car payment. You’ll also need to consider auto insurance, gas, maintenance and repair costs.

If you currently have a car and a car payment, you already have a good idea of your monthly car spend. However, if you are buying your first car, you’ll need to do some homework. Find an online calculator, like Edmund’s, that provides yearly ownership estimates for different car makes and models.

Suppose you determine the following monthly costs for a two-year-old sedan for a total of $228:

  • Maintenance: $60
  • Repairs: $8
  • Fuel: $100
  • Insurance: $60

If you can afford to spend $650 per month on a car, you’ll have $422 after expenses for a car payment.

Make Your Money Work for You

2. Calculate How Much Down Payment You’ll Need To Save

Once you know the monthly car payment you can afford, you can determine how to get into a car for that monthly amount. Price a few cars you like, and then use an online auto calculator to determine how to get your monthly payment down to your price range. You can reduce your monthly payment by getting longer loan terms or putting more money down.

If possible, avoid getting a car loan longer than five years. Three or four years is better. You will be able to pay off the car faster and for a lot less interest.

If the car you want is out of your price range on a three- to five-year loan, determine how much of a down payment you’ll need to afford the financing. This is how much money you’ll need to save. Don’t forget to factor in your trade-in as part of the down payment, if you’ll have one.

3. Make Car Payments to Yourself To Save the Down Payment

Figuring out how to save up for a car is the easy part. Saving the money may be a challenge.

A smart way to save your down payment is to start making that monthly car payment — the one you determined in step one — to yourself. Put it into a dedicated savings account, ideally one with low fees and a high annual percentage yield. It will be part of your budget soon enough anyway.

If you can’t easily save that monthly payment, you’ll have difficulty keeping up with monthly loan payments.

It may help to automate the savings so you don’t forget. If you receive paychecks via direct deposit, elect to send some of it to your savings account. Or set up automatic transfers from another bank account into your dedicated car savings each month.

Make Your Money Work for You

It can take several months to save up a down payment. Find ways to cut out some non-essential monthly expenses or pick up a side gig to reach your goal faster.


Knowing how to save for a car is only part of getting into a vehicle that fits your budget. You also want to get the best deal on the vehicle and the financing.

While saving for that down payment, do anything necessary to improve your credit score to ensure the best financing rate. Also, start researching how to negotiate the best deal when buying a car, especially if you’ll be going to a dealership.  


Here are some quick answers to common questions about saving for a car.
  • How much should I save up for a car?
    • When saving for a car you intend to finance, you need to save up a down payment that will get the remaining car price down to an amount you can afford to finance.
    • Don't forget to factor in how much you'll need on hand for monthly maintenance and expenses beyond just making the car payment.
  • What is the best way to save for a car?
    • The best way to save for a car is to determine how much of a car payment you can afford per month. Then begin making that monthly car payment to yourself and putting it into a savings account. This will allow you to save up a down payment while ensuring your budget can handle the monthly payment.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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