How to save for a car in the UK?

Buying a car is a big step, so planning your savings early makes the process easier and less stressful. Setting a clear savings goal and knowing the kind of car you want will give you an idea of how much to save and how long it might take. In this guide, you’ll find practical ways to start saving for a car, stay on track, and reduce the cost when you finally decide to buy.

This article will show you 13 ways to save money and explore other questions as well!

Why save up for a car?

Saving first gives you control. A bigger deposit (upfront amount you pay at the start) cuts the amount you borrow, lowers monthly payments, and can shorten the number of months you repay. You choose the term rather than stretch your budget. You decide what you afford to put down to keep payments comfortable.

Cash opens more doors. With a healthy pot, you can buy a car outright, negotiate harder, or switch model without chasing finance approvals. Paying cash avoids interest, so more of your money goes into the car, not charges. That flexibility helps if deals change on the day.

Savings protect your budget. A clear car budget must cover purchase and running costs, and those costs can vary by fuel type, insurance, tax, and maintenance. Savings act as a buffer so you only commit to much you can afford now and later. That reduces stress if prices move after you sign.

Why save before getting car finance?

1. Savings cut borrowing. A larger deposit (upfront amount you pay at the start) means you borrow less. Many UK lenders require at least 10%—so on a £20,000 car that’s £2,000—but drivers often save 10–30%, depending on comfort and finance type. Bigger deposits shrink monthly payments, lower total interest, and may shorten the number of months you repay.
2. Savings widen your choices. Strong car savings let you pay with cash, buy a car outright, or place a larger deposit on finance. If you lease a car, that buffer covers the initial rental and lowers your monthly cost. You gain flexibility—and negotiating power.
3. Savings protect your expenses. After purchase, running costs hit: car insurance, tax, fuel, and maintenance. The average UK comprehensive car insurance now runs at £757 per year—the lowest in two years and down £144 year-on-year. (Confused.com index, June 2025) Paying monthly adds extra charges—FCA warns instalment plans can tack on £35–£51 extra annually. (FCA report, recent ) Save to pay these costs upfront and keep peace of mind.

Savings help you reach your goal. Automate deposits and define monthly savings targets that suit your income. That system will build momentum, keep you accountable, and reinforce your clear savings goal without drama.

Carplus lets you preview how different deposit levels affect monthly payments. Set your goal clearly, then see how much you can afford—and let us help you reach your goal.

How much do I need to save for a car?

Start with real market prices rather than guesses. For used vehicles, look at the retail asking price, which already includes VAT, dealer preparation, and usually the remaining MOT. Mileage, age, and condition affect the final figure, so treat the ranges below as starting points for typical 2025 forecourt prices from reputable UK dealers.

Pick a model and translate to a deposit. Most buyers aim for 10–20% as a deposit (upfront amount you pay at the start). The table shows realistic examples using current RRPs. This turns list prices into concrete savings targets.

Example model RRPs and deposits (2025)

Aim higher than the minimum if you can, as a bigger deposit cuts monthly payments and total interest. Choose a figure that fits your budget so you can stick to it without strain. Review prices before you commit, as trims and options change totals.

How long does it take to save for a car?

Once you know the size of your deposit, the rest comes down to how much you can put aside each month. Your net pay (the income left after Income Tax and National Insurance) sets the limit for what you can save without stretching your budget. A simple way to work out the timeline is to divide your savings target by your monthly saving amount.

Using 2025/26 tax and NI rates makes the calculation more reliable. In England, the Personal Allowance is £12,570, the basic rate of Income Tax is 20% up to £50,270, and earnings between the NI threshold and upper limit are charged 8% for employee National Insurance. These figures decide your take-home pay and, ultimately, how quickly you can build your deposit.

For example, a £15,000 car with a deposit target of one-third (£5,000) and a salary of £50,000 would give a take-home of roughly £39,520 a year, or about £3,293 a month. Saving 20% of that income—around £659 a month—would see the deposit ready in about eight months (£5,000 ÷ £659 ≈ 7.6). Checking your own figures with an HMRC calculator helps you set a target that works for your situation.

Revisiting your plan every few months keeps it realistic, especially if your expenses or income change. Small adjustments to what you save, what you spend, or how long you give yourself can make the difference between struggling and hitting your goal on time.

How should I save up for the car?

You move faster when you know what kind of car you want to buy and set a target that matches the price of the car.

1. Determine the size of your deposit

Decide what kind of car you want to buy and check the price of the car. Most finance options require a deposit of at least 10%, and some ask for 20%. That single choice sets the amount you need to borrow and how much you’ll save money for a car each month.

Pick a deposit you can afford. A £20,000 car with a 10% deposit means £2,000. At 20%, you’ll need £4,000. A larger deposit cuts payments because you borrow less. Choosing a used car can lower both the target and the loan. But it still gives you flexibility when negotiating the cost of your new car.

Set a monthly savings goal that fits your budget. Keep it separate from your everyday spending so it’s harder to dip into. Automate transfers on payday and add extra income from overtime or side work. Some savings accounts pay higher interest, which can help you save faster. Track your progress each month to make sure your plan still works and matches how much you need to save.

2. Decide whether you should get new or used

A new car gives you the latest features, full choice of colour and trim, and a manufacturer warranty that can last 3–7 years. And maintenance is often cheaper in the early years. But new cars lose value quickly — often 40–60% in the first three years — and they usually cost more to insure.

A used car costs less to buy and insure. And the value drops more slowly after the first few years. But there may be wear and tear, limited choice, and shorter warranty cover. If you buy from a dealer, your rights are protected under the Consumer Rights Act, but private sales give you fewer protections.

3. Decide whether you should buy or lease

Buying means you pay the full price, either in cash or through finance, and you own the car. You can keep it as long as you like, sell it, or trade it in. But you’ll need a larger deposit and you’ll cover long-term maintenance once the warranty ends.

Leasing lets you drive a car for a fixed term, often with a lower upfront cost called the initial rental. And it usually includes a mileage limit, with charges if you go over. You hand the car back at the end and avoid the hassle of selling. But you never own it, and damage beyond fair wear and tear can cost extra.

4. Choose the optimal vehicle for you

Start with how you’ll use the car. Think about your trips, passengers, boot space, and parking at home. Then match size and fuel type to your routine. Total cost of ownership (all yearly costs: insurance, tax, fuel/energy, servicing) matters as much as the price tag. Pick what fits your life first, then refine by features.

Focus on the essentials you’ll use every day. Safety tech like autonomous emergency braking, parking sensors, and blind-spot alerts can cut stress on busy roads. Connectivity for calls and maps helps if you drive to new places often. And a smaller car can suit tight city parking, while estates and SUVs handle family kit and longer trips. Choose the tool that fits the job.

Use one simple test to check the shortlist. Can you park it easily, afford the running costs, and live with it on your longest regular journey? If you answer “yes” three times, keep it on the list. If not, drop it and try the next option. Aim for a car you’ll enjoy using every week, not just on day one.

5. Figure out whether you need more than one car

Start with schedules, not dreams. If two drivers must be in different places at the same time, a second car can save time and hassle. But if diaries overlap only a little, sharing with planning apps, lifts, or public transport may be cheaper and simpler. Write down a week of trips and see the real clashes.

Run the full numbers before you commit. A second car adds another deposit, insurance, tax, fuel/charging, servicing, tyres, and MOTs. And it loses value over time like the first one. If one car earns income or must carry tools, a workhorse can pay its way, but only when the calendar and cash flow prove it. Let the maths decide, not habit.

6. Set a savings goal

Start with a single number and a date. That’s the best way to save because it gives focus and momentum. Use a goal tool or a simple sheet to work out how much you need and how long it will take, then lock that figure in your calendar. And keep the term definitions clear: deposit is the upfront amount you pay at the start.

Turn the target into realistic monthly savings you can keep. Move that money on payday with a standing order, and keep the pot in a separate space so you don’t spend it by accident. Regular savers can help because many savings accounts pay higher rates if you pay in each month. And the jam-jar method makes ring-fencing money simple.

Match the goal to your car choice. If you see yourself buying a used model, your target may be smaller and often cheaper to insure than a comparable new car, but always check the insurance group first. Or you might plan to buy the car in full later and own the car without monthly payments. Keep bills current while you save, as steady payments can improve your credit score before you apply.

7. Improve your negotiation skills

Good research builds confidence at the desk and online. Compare prices, check history, and arrive with a clear budget and deposit. Ask for the full car purchase breakdown and read the finance terms slowly. And confirm limits and fees tied to mileage and wear and tear before you sign anything.

Use these tips to help you agree a fair price. Start with the total on-the-road cost, then talk about extras and swaps. Ask for value adds if the price won’t move: servicing, mats, or a fresh MOT. If you’re buying one from a dealer, keep everything in writing and be ready to walk away.

Check what matters beyond price. Confirm any mileage cap on PCP/PCH and the excess-mile rate; those pennies add up quickly. And make sure the car fits your use so you don’t rack up avoidable fees later. That clarity protects the amount you need and the need to borrow after delivery.

8. Consider for car-related expenses

Running costs decide what you can truly afford. Add these to your plan: car insurance (annual premium you pay to insure the car), VED (car tax), fuel or electricity, servicing and tyres, MOT (annual safety test), parking and tolls, breakdown cover, and any finance interest. And remember age and mileage push maintenance higher as cars get older.

Use a simple method to build a monthly figure. Take yearly costs like insurance, VED, MOT, and breakdown cover, and divide by 12. Then add a fuel or electricity estimate for your driving. For petrol or diesel, use monthly miles ÷ mpg × 4.546 × price per litre. For EVs, use monthly kWh × tariff price (battery use per 100 miles × monthly miles). This gives one number you can slot into your budget.

Work a quick example so it sticks. If your yearly insurance is £720 and VED is £180, that’s £75 per month. Add your fuel or electricity estimate, a maintenance pot you can grow over time, and regular parking. And keep a small buffer for surprise repairs, especially on older cars.

9. Trim your spending

Small changes move real money into your car pot. Pick three categories you can cut this month, set a number for each, and move that amount by standing order the day you get paid. And rename the pot “Car deposit” to keep focus high.

Use quick wins first. Cancel unused subscriptions, switch to a cheaper mobile or broadband plan, and review insurance at renewal. Plan meals and take a list to the shop. And choose free or low-cost activities for a few weekends each month.

Target habits that leak cash. Carry a set amount of cash for discretionary spends. Batch small online orders to avoid delivery fees. And sell items you don’t use to add a one-off boost to your fund.

10. Open a savings account

Open a separate high-interest account for your car fund. Name it “Car deposit” so you see the purpose each time you log in. And keep it ring-fenced using the jam-jar/pots approach, which helps you stick to your plan and avoid dipping into the money.

Check that the account is FSCS-protected up to £85,000 per person, per bank group, and use the official checker if you hold money across brands that share a licence. This protects your cash if a bank fails. Then compare regular saver accounts, which often pay higher rates when you commit a set monthly amount.

11. Make saving automatic

Set a standing order to move money into the car account on payday. You decide the amount and date once, and the bank does the rest each month. And review it quarterly so the figure still fits your budget.

Add smart extras if you like. Turn on round-ups in your banking app so each card purchase rounds to the nearest pound and the spare change moves into your pot. Monzo and Starling both support this, and autosaving apps can add further rules. Small, frequent top-ups build momentum without effort.

12. Make extra money with a side hustle

Start with one skill and a time limit. Pick something you can do weekly without burning out. And ring-fence the income so it goes straight to your car fund, not general spending. For example, set four hours on Saturday, invoice on Sunday, and move the money the same day.

Choose a side hustle that fits your strengths. Use what you know first, then add simple services people already buy. Keep records from day one and check basic tax rules if your income grows. A separate “Car fund” space helps you stay honest and track progress.

13. Budget additional costs

Plan the running costs before you drive away. List insurance, tax, fuel or electricity, servicing, tyres, MOT, parking, tolls, and breakdown cover. Then split yearly bills into monthly “pots” so the money is ready when due. For example, £600 insurance becomes £50 per month in a labelled pot.

Look for simple savings that stick. Use a trusted independent garage for routine work, follow the service schedule, and drive smoothly to save fuel. And skip cosmetic modifications that raise premiums. Car-share school runs or commute days if it cuts miles and stress.

Build two small buffers. Keep a maintenance pot for wear items and a separate emergency pot for surprise fixes. Review both every three months and adjust the amounts after any bill. That habit keeps the plan realistic all year.

Flexible options for buying a car

Pick finance that fits your budget and how you drive. PCP and HP handle ownership differently and feel different month to month. And both sit under UK consumer credit law, which gives you rights on early settlement and, in some cases, voluntary termination. Carplus will keep the contrasts simple so you can choose with confidence.

PCP

Personal Contract Purchase is a credit agreement with lower monthly payments and an optional final payment/balloon (also called GMFV, the car’s predicted value at term end). You agree to an annual mileage cap and fair wear-and-tear standards. Go over either and you’ll face end-of-term charges.

You have three routes: hand the car back and walk away (subject to mileage/condition), pay the optional final payment to own the car, or part-exchange if the car is worth more than the balloon and use any equity towards a new deal.

Mileage caps are common (often around 10,000 miles/year) and excess-mile fees can add up quickly (typical bands ~3p–30p per mile, lender-specific). Keep the car within fair wear standards to avoid damage charges. Ask the lender for a settlement figure if you want to end early; UK rules allow an interest rebate when you settle. Voluntary termination can apply once you’ve paid 50% of the total amount payable.

HP

Hire Purchase spreads the full price of the car over fixed monthly instalments after a deposit. There’s no balloon at the end; you own the car after the final payment. Monthly payments are usually higher than PCP because you finance the whole amount.

Terms typically last 1–5 years. There’s no mileage cap in the agreement, so you won’t face excess-mile fees from the finance itself. If you want to end early, ask for a settlement figure; under UK rules, settling early reduces the total interest you pay. Voluntary termination may be available once you’ve paid 50% of the total amount payable.

You still carry running costs and market-value risk, because you become the owner. Keep servicing on schedule to protect value and avoid avoidable repair bills.

Let’s conclude - how to save up for a car?

Even when you’re on a budget, you can take the stress out of buying a car - just have a solid plan and save! The earlier you start prepping for the deposit, the smoother and more manageable everything will be. Follow the tips from above and thank yourself later!

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