How to save for a car: Tips and tricks

Whether you're buying a new car or a used car, the financial decision to purchase a car must be approached seriously. It requires planning and adjusting your spending habits. Most of the time, you have to come up with a roadmap of how to save money for a car. And sometimes, you have to find creative ways to maximise the amount you save.

The best tip for saving for a car is to start today! Starting early can help you save so much more money for a down payment, which can lower the overall cost of buying a car, monthly payments and the time of payment.

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

Why save up for a car?

Having some money saved up allows you to enjoy greater security and explore more options. The more you’re able to save, the better your position will be when shopping around.

Imagine this: you have a substantial sum in the savings account. This means having the freedom to make choices separate from earning a pay cheque - a better, bigger, newer car. For some, it means being able to afford a car without getting over their head in debt.

Why save before getting car finance?

Most finance companies will require a deposit from the customer. Normally, it is between 10% and 20% of the car purchase price. But even if it’s not a requirement, there are at least three major reasons to save before taking out a car loan:

  • A bigger deposit reduces the amount you need to borrow, making your payments more affordable or the repayment term shorter.
  • It helps you reduce the amount of interest you’ll end up paying over the course of your loan term.
  • You’ll have more funds to tackle other goals. For example, it can be bigger financial milestones like a home or a renovation.

If you are looking to purchase a car, Carplus will be happy to assist you! Our team of car finance experts works with a large panel of lenders, so you can find the vehicle of your choice for a reasonable price with a comfortable monthly payment, just fill out the form.

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How much do I need to save for a car?

The average price of a car in the UK ranges from £12,000 to £36,000.

  • Small cars cost on average between £12,000 and £17,000
  • Medium cars: £22,000-£36,000
  • SUVs: £23,000-£28,000

So, depending on the price of the car, your savings target will vary. Naturally, the higher the full price, the bigger the deposit. Let’s calculate the minimum amounts to save using a few examples:

  • Hyundai i10 (£13,430): The deposit of 20% would be £686.
  • The Volkswagen Polo (£18,855): You’ll need at least £3,771.
  • Nissan Qashqai (£25,505): The minimum to save would be £5,101.

Setting your target higher than the minimum is always a good idea. However, make sure your goal is achievable so that you can comfortably stick to it.

How long does it take to save for a car?

When you know how much you need to save for a car, you’re halfway to knowing how long it will take. You also need to account for your monthly income, expenses you can’t cut, and volatility in car prices.

Here is a scenario. You’re planning to buy a car worth £15,000 and want to save a third for a deposit. If you make £50,000 a year, you will be taxed £12,800, which means your net pay will be £37,200 per year or £3,100 per month. Let’s say you save 20% each month, all of which will go to your future car.

For you, it’ll take eight months to save the amount you need.

How should I save up for the car?

Looking for inspiration and actionable advice to maximise your saving? This section shares 13 personal finance tips to help along the journey of saving up money for a car.

1. Determine the size of your deposit

Choose a car in the price range you can afford and calculate the deposit based on it. As mentioned, you should aim for a deposit of 20% for a new car (see a few example calculations above). The deposit may be reduced to 10% for a pre-owned car.

Making a higher deposit may help you qualify for a better loan. You can read more on what deposit you should make and how it will affect your contract.

2. Decide whether you should get new or used

This decision entirely depends on your needs and preferences:

  • New vehicle: offers the latest bells, customisable, cheaper maintenance, a warranty and roadside assistance, more expensive, quick to depreciate, higher insurance costs
  • Used vehicle: lower prices, cheaper to insure, slower depreciation, fewer consumer protections, limited options, wear and tear

3. Decide whether you should buy or lease

Buying a car means paying the full price (market or resale, depending on what you go for) to become the legal owner. Leasing means paying a smaller amount than the total car price to drive it for a set number of years and returning it to the dealership.

Here is a brief comparison of the two:

  • Buying: builds equity, allows to sell or trade-in, no limits and extra charges for heavier use, rather expensive, a substantial deposit, long-term maintenance costs
  • Leasing: requires little money upfront and is more affordable overall, protection against unanticipated depreciation, no ownership, higher insurance premiums, mileage and wear and tear restrictions

4. Choose the optimal vehicle for you

The “optimal car” depends on who you are and what you expect from a car. Some want to make a statement with their car, and some just value the practical aspect of having one.

Your choice will depend on the type of driving you do, how often you need a car, your must-have features (wireless connectivity, blind spot monitoring, etc.), your available parking space, and many other factors.

5. Figure out whether you need more than one car

If you are financially secure and can reasonably expect to be able to afford more than one car, shopping for a second car may be the option for you. It can also make sense if one of the cars can produce income or be used as a work vehicle.

Obviously, if you’ll need to make more than one deposit, you’ll need to multiply the amount of money to save.

6. Set a savings goal

Set a goal that will motivate you, and write it down to make it feel tangible. It’s not just about the numbers - it also helps to keep in mind the image of your dream car (rather than a certain amount of money).

We also recommend:

  • Mapping out the timeline for your goal
  • Creating weekly and monthly milestones
  • Doing the math in as much detail as possible
  • Reminding yourself that it doesn’t have to be a solo effort

7. Improve your negotiation skills

Before visiting the dealership, do your homework to approach the salesperson with confidence. You’d be surprised to know how big of a difference successful negotiation can make on the car price quoted. You can also take some of the stress out by making these exchanges online.

8. Consider for car-related expenses

The deposit + monthly payments + interest rate (or the total car payment if you pay upfront) are not the only expenses you’ll need to save for. Car-related expenses also add up to a pretty hefty sum of money.

Estimate how much you’ll be spending on fuel/electricity, tax, insurance, maintenance and repairs, parking, etc. Most of these costs depend on the type of car and its age.

9. Trim your spending

The less you spend, the more you can contribute to your car fund.

Here are some ideas on how to cut spending:

  • Adopt the DIY approach
  • Plan your spending, limit unplanned purchases
  • Have no-spend days
  • Consider going to cash only
  • Cancel subscriptions you’re not using
  • Prioritise free activities and entertainment

10. Open a savings account

Open separate high-interest savings account that you’ll use only for car expenses. This way, you won’t be tempted to dip into the finds for anything else. This will be a safe home for your money that you can repurpose after paying off the car.

Make sure to shop around for good deals at different banks!

11. Make saving automatic

Before your paycheck hits your bank account, a portion of it can go into savings. This can usually be set up directly in your bank app. Make sure the bank won’t charge unreasonable for an extra account.

Another fun idea for saving is to download a round-up app, which sets aside spare change from every purchase. For example, if you spend £5.20, the app will send 80p to your savings.

12. Make extra money with a side hustle

Having a side job isn’t for everyone, but maybe you just haven’t found the right one. Consider these:

  • User testing
  • Becoming a manager or personal assistant
  • Dog walking or pet sitting
  • Babysitting
  • Offering domestic services
  • Tutoring
  • Selling crafts
  • Renting out your house, parking space, etc. or hosting
  • Working as an extra
  • Transcribing

13. Budget additional costs

Find ways to save money on little things after getting the car, too. It can involve finding a cheaper independent garage, improving fuel efficiency, opting out of car modifications, driving carefully, carpooling, and more.

And finally, create a budget that is realistic (not optimistic) and stick to it in the long term!

Flexible options for buying a car

It’s important to choose car loans that are more suited to your current lifestyle and needs. Not only can you decide on the timeframe and repayment plan, but you can also pick the agreement terms and what happens at the end of the financing contract.

Let’s compare the two most common financing options.

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Personal Contract Purchase (PCP) is a long-term car rental arrangement, at the end of which the borrower has three options:

  • Return the car back to the dealership
  • Make the balloon payment equal to resale value and keep the car
  • Use the payment towards buying a new car

PCP agreements usually last between 3 to 5 years, involve an upfront deposit, and, as demonstrated by the options above, offer a fair deal of flexibility. While the monthly car payment is generally smaller, if you wish to settle the deal early, you’ll have to pay a settlement figure.


Hire Purchase (HP) involves paying a deposit (10%) and paying off the value of the car in monthly instalments. Unlike with PCP, you are borrowing the total value of the car, which means the repayments are generally higher. But on the plus side, once you make the final monthly payment, the car will be yours.

Here are a few other facts about HP:

  • The contracts last 1-5 years.
  • You can settle the finance deal early without penalties.
  • You’re not tied to a pre-agreed annual mileage prediction.
  • There is no lump sum payment at the end.

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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