How much should you save for a car?

Many may consider saving up and buying a car to be territory for the newly licensed. Not so, actually. According to data from Progressive, the average lifespan of a car is around 200,000 miles. Depending on how much you drive, a car can last up to ten years (or more!) with regular maintenance and care. Still, at some point or another, you're definitely going to be in either your 20s or 30s and wondering “How much should you save for a car?” The article below includes some quick-and-dirty rules to follow as well as key considerations to use when you want to determine the specific amount you'll need to make your next car purchase.

How much should I save for a car?

When trying to determine how much to save for a car, try to aim for at least 15% of the purchase price. This will enable you to make a nice downpayment, which will often get you a lower interest rate and limit the amount you'll need to finance. (Even better, pay for a car in cash and live without a car payment!)

If you have an idea of the kind of car you want and a good idea of how much it will cost you, you can definitely set a goal for much money you need to save.

• Cars.com has a great calculator that shows different car-cost metrics.
• This affordability calculator can show you the price range that fits your monthly budget.
• If you already know the vehicle price, interest rate of the loan, and loan rates, their car loan calculator can show what you would pay in monthly payments and give you an overall price.

These helpful calculators will give you an idea of how much you can realistically afford when it comes to buying a car. And it can get you on the right path to set up your budget to start saving for a car.

Also, don't forget about taxes and fees that will be due on the day of purchase, as this can impact how much you'll have to put down toward the auto itself.

Other considerations that will impact how much you can save.

• Your debt-to-income ratio: or how much you're already spending each month in debt repayment. This may impact your ability to qualify for a loan amount large enough for a car purchase.
• How far along you are in other savings goals: saving up for a new car is great and all, but if you have a working vehicle and other financial priorities such as saving up an emergency fund or paying off debt, the funds for a new vehicle may be best used elsewhere.
• Your credit score: if you have low or thin credit, you may not receive the most advantageous interest rate. In this instance, having more money to put down on the car may lower the interest rate on the remainder that you need to finance. (Here are my three best tips for how to raise your credit score by 40 points.)

How can I save money for a car?

In a nutshell, here are the practical steps you’ll take to determine how much you should save for a car:

1. Find out the type of car you want
2. Research that specific vehicle type and average list price
3. Decide whether you want to buy the new or used/older version of that car
4. Figure out how much the car you want will cost you (are you saving up to buy the car outright or just a 15%(ish) down payment?)
5. Start a car-savings goal and add it to your household budget
6. Check your credit and get prequalified for a loan
7. Continue saving up for a car

It's also important for me to mention here that if you're going to leverage financing to pay for a car, you need to SHOP THE INTEREST rate, the same way you would with a home mortgage. 5% interest is very different than 7% and the higher the rate, the more you'll pay each month. Shopping interest rates is always, always, always one of the smartest things you can do when you need to borrow money. You can check your rate with multiple lenders, for free, IN MINUTES with LendingTree. Click here to check your rate.

How can you save money for a car faster?

The answer is that it depends on how much you need. Are you saving for the full payment – buying the car outright? Or are you saving for a down payment and financing with a car loan?

No matter the route, to save up money for a car faster you'll need to either substantially reduce your expenses or find ways to earn more. Ideally both. Here are my favorite income-earning side hustles for those who already work 9-5 and my guide for how to save $5k in 3 months.

If you know how much you need then figure out when you need the money. Your rate of saving will determine how much you need to save each month.

• There are ways you can save money fast – check out how I saved $1000 in just 45 days – so knowing your numbers and your timeline is key.
• Another way to help you save money fast is to cut as much spending as you can (temporarily) at least until you reach your goal.
• 13 side gigs that make $1,000+ per month
• For those who want to buy the vehicle outright –> How to save $20,000 in one year

Hustle to earn extra money for savings

Now’s the time to make some extra money with a side hustle to put toward that car you’re saving up for.

• Drive for Uber or Lyft
• Find legit side jobs on Craigslist
• Try grocery delivery with Instacart

How can I save money for a car on a low income?

Being on a low-income scale doesn’t have to discourage you from saving up for a car. There are a ton of creative ways to save money that can help you get to your financial goals faster.

• One great way to trick yourself into saving money for a car is to automate your savings each month so you don’t have to think about it. There are round up savings apps that can help save small chunks of money for you.
• Qapital can automatically move money into a car savings account at monthly/weekly intervals. Click here to try out Qapital free for 30 days and get $25.

If you have a low income, you probably don't have extra to save from your paycheck on a low income, so earning more and figuring out ways to save money on your highest expenses – like your fixed utility bills, is going to be your best bet. There are companies out there that can assist you in lowering your monthly Bills, like BillTrim and RocketMoney (which can also function as a great budgeting tool to stay on top of your spending!)

Conclusion

Like most financial goals, there's no magic trick to figuring out how much you should save for a car, it's about determining your own desires (how much do you want to spend on a car?), how much you can save each month, and then maintaining that consistency until you hit your goal. If you choose to finance – just remember to shop interest rates so you save money over the life of the auto loan!