Woman driving a car with man in the passenger seat, both smiling

How to Save for a Car

5 min read

Last Updated: February 5, 2026

Table of contents

Key Takeaways

Before you shop for a new car, it’s important to establish a budget that includes your down payment, monthly bills, and additional expenses.
A down payment may help you save money on interest and avoid overspending on your car.
Cutting unnecessary expenses and taking on another job could help you save for your car more quickly.

Are you looking to upgrade your ride or purchase your first vehicle? Whatever your situation, the car buying process is easier and less financially stressful with thoughtful research and planning.

While a credit card may help you earn rewards on gas or maintenance needs, most people finance a vehicle purchase through a car dealership or bank. Before you take the leap, it can be helpful to determine your down payment and develop a budget for your monthly car-related expenses. Read on for effective ways to save for a new vehicle that can help meet your needs without breaking your budget.

Establish your car budget

Before you begin shopping, it’s a good idea to determine what you can afford. To find your car budget, consider these for your current financial situation:

Income
Monthly expenses
Debts
Additional car ownership costs (loan payment, tax, title, license, auto insurance, maintenance, fuel)

With these figures in mind, estimate how much you can comfortably allocate to your car fund. Getting a car could stretch your budget, but you also don’t want it to impact your ability to cover necessities.

With your price range in mind, you can begin researching your options. What models are realistic for your budget? Consider the features you’d splurge on and any add-ons you could do without. In addition to shopping around for the car itself, compare financing options. Some lenders may offer you a better deal than others.

Determine your down payment

Your down payment influences the monthly car payment, the length of your auto loan term, and how much interest you will owe over that term. The amount of money you put down at time of purchase can lower your monthly payments. A big down payment could also help you repay your car loan more quickly. With a shorter loan term, you may also reduce your interest charges.

Your down payment will depend on your personal financial circumstances and the car’s purchase price, which includes the selling price, taxes, fees, and add-ons). However, conventional advice has been to put down at least 20% for a new car and 10% for a used car.

Consider additional car expenses

Without careful planning, the total cost of a new car could leave a dent in your budget. Beyond the car price, extra vehicle expenses include registration costs, maintenance, car insurance, and gas. Insurance premiums may vary depending on your age, driving record, where you live, and your credit score. Gas (or electricity) costs may vary based on how much you drive, gas prices, and your car’s fuel efficiency. Keep those factors in mind as you save.

Did you know?

A credit card that offers cash back rewards could be one way to help your car savings plan. As you use your rewards credit card, you’ll earn back a percentage of what you spend.

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Check your credit score

Checking your credit score before you go car shopping could help you make informed decisions. With a higher credit score, you may qualify for more favorable car loan terms, like a lower interest rate or smaller payments. If your credit score is less-than-ideal, a larger down payment could help you secure the car you want.

You may be able to check your credit score through your credit card issuer, a credit score service, or a credit reporting agency. You can request your free credit report at AnnualCreditReport.com (though they don’t typically include your scores).

Start your car savings plan

After you’ve established your price range, you can begin saving money to pay for your car. The right savings plan for you depends on your unique financial situation. One popular budget framework is called the 50/30/20 plan, where:

50% of your income goes to expenses
30% of your income goes to non-essential purchases
20% of your income goes into savings

You might try a few budgeting tools until you find the right fit.

Use your monthly budget to figure out what you can save for a car

With your car budget and savings goal in hand, review your budget and expenses. If you usually have extra money at the end of the month, consider how much of it will go to your car savings. On the other hand, if you tend to expend most of your income, you may need to make some changes to afford a new car.

Cut expenses

To build your savings more quickly, you may reconsider some of your existing expenses. Car costs shouldn’t affect your necessities like groceries or rent. However, you might have to reduce non-essential costs like streaming services, travel, entertainment, and dining out to meet your car savings goal.

Sell or trade your old vehicle

If you’re replacing your old car, you might trade it in to a dealer or sell it to help you earn extra cash. Some dealerships reduce the cost of your new car if you trade in your old vehicle. Researching your old car’s value could help you negotiate the best deal.

You could also sell your current car if your dealership doesn’t offer what you’re looking for. It may take extra time and effort to find a buyer but could be worth it if it means getting something for your old car.

Get a side job

If you can’t make room in your budget for a new car, a side job could increase your income. Consider your availability, lifestyle, and skills. Popular side gigs include freelance writing, selling your art, babysitting, or food delivery. You might consider placing all your extra income into a dedicated savings account for your new vehicle. That way, you won’t be tempted to spend the extra cash on other things.

The bottom line

A new car purchase is an important decision, and one that may have an impact on your personal finances. Careful budgeting, being realistic about what you can afford, and proactively saving can prevent stress—and the strain on your wallet—as you pursue your financial goals.

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