Buying a car: how to budget and save


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With the average monthly car payment now at $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 start buying a car, you need to figure out how much you need to save for a down payment. Here’s how to save for a car in three easy steps.

  1. Determine your monthly car expenses
  2. Calculate how much down payment you will need
  3. Save your deposit

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How to save for a car that fits your budget

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

1. Determine your monthly car expenses

With a vehicle, the monthly cost will be more than the car payment. You will also need to factor in car 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 expenses. However, if you’re buying your first car, you’ll need to do some homework. Find an online calculator, like Edmund’s, that provides annual ownership estimates for different makes and models of cars.

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 a month on a car, you will have $422 after expenses for car payment.

2. Calculate how much down payment you’ll need to save

Once you know the monthly car payment you can afford, you can figure out how to get into a car for that monthly amount. Evaluate a few cars you like, then use an automated online calculator to figure out how to lower your monthly payment to your price range. You can lower your monthly payment by getting longer loan terms or paying more money.

If possible, avoid taking out a car loan that is more than five years old. Three or four years is better. You’ll be able to pay off the car faster and for much less interest.

If the car you want is out of your price range on a three to five year loan, figure out how much down payment you’ll need to afford financing. This is how much money you will need to save. Remember to account for your exchange as part of the down payment, if you have one.

3. Make car payments for yourself to save the down payment

Understanding how to save for a car is the easy part. Saving money can 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 — for yourself. Put it in a dedicated savings account, ideally with low fees and a high annual percentage return. It will soon be part of your budget anyway.

If you cannot easily save this monthly payment, you will have a hard time keeping up with the monthly loan payments.

It can be useful to automate savings so you don’t forget. If you receive paychecks by direct deposit, choose to send a portion to your savings account. Or set up monthly automatic transfers from another bank account to your dedicated car savings.

It may take several months to save a deposit. Find ways to reduce some non-essential monthly expenses or take a side gig to reach your goal faster.


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

While saving for that down payment, do whatever it takes to improve your credit score to get the best financing rate. Also, start researching how to negotiate the best deal when buying a car, especially if you’re going to a dealership.


Here are some quick answers to common questions about saving for a car.

  • How much should I save for a car?
    • When you save for a car you intend to finance, you should save a down payment which will reduce the remaining price of the car to an amount you can afford to finance.
    • Don’t forget to factor in how much you’ll need for monthly maintenance and expenses beyond just paying for the vehicle.
  • What’s the best way to save for a car?
    • The best way to save for a car is to figure out how much car payment you can afford per month. Then start making that monthly car payment to yourself and putting it in a savings account. This will save you 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 accurate, unbiased and up-to-date content. We verify every statistic, quote and fact using trusted primary resources to ensure that the information we provide is correct. You can read more about GOBankingRates processes and standards in our Editorial Policy.

About the Author

Andrea Norris has worked in the web publishing industry for 15 years, both as a content contributor and editor specializing in topics related to personal finance, frugal living, home and automotive . She writes short and long content and is well trained in SEO keyword research and writing.


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