How Do I Save Up For a Car?
<div class="user-question">Hi Frich, I’ve been looking at some cars and struggling on making the money towards the car ,what are some saving methods that are effective?</div>
Hi there & thank you for sending in your question!
Saving for a car can feel like an uphill battle, especially when you factor in costs beyond just the sticker price - things like insurance, maintenance, and registration fees add up quite quickly. But with the right plan, you can hit your savings goal faster while also making smart financial decisions that keep car ownership affordable in the long run. Let’s dive into the best strategies to save up for and afford the right car for you!
🚗 Create a Dedicated Car Savings Plan
One of the best ways to stay on track is by setting up a separate savings account specifically for your car fund. Keeping this money separate from your regular spending can help you avoid dipping into it for everyday expenses.
<div class="frich-tip">Frich tip: a high-yield savings (HYSA) account can help you earn extra interest on your money while you save.</div>
To set your savings target, determine when you want to buy the car and how much you need. For example, saving $500 per month for two years would get you to $12,000 - but with a 5% HYSA, interest earnings could shorten that timeline. Setting up automatic transfers and cutting unnecessary expenses will help you reach your goal even faster.
Not sure how to make the most of your budget? Be sure to avoid these common money mistakes that could slow down your progress.
🚗 Set a Realistic Budget for Your Car
Before you start shopping for a car, it’s important to determine how much you can truly afford - including not just the price of the car but also insurance, maintenance, and gas. Check out this calculator tool to help you run the numbers.
Use the 50/30/20 budgeting rule as a guideline:
- 50% of your income goes toward necessities (including car expenses)
- 30% goes toward wants (like entertainment and dining out)
- 20% goes toward savings and debt repayment (which should include your car savings)
If you're planning to finance part of your purchase, make sure you're getting the best possible deal. High-interest loans can cost you thousands over time, so exploring no-interest credit card options could help you manage costs more effectively - just be sure to pay off the balance before the promotional period ends!
🚗 Price It Out
If you've found a car or multiple vehicles you're interested in, it's time to check prices. The Kelley Blue Book (KBB) is a helpful resource for checking prices on both new and used cars. KBB lets you search prices by year, make, and model of the vehicle you're looking for.
Once you put in the vehicle's information, you get to see cars for sale in your area. You'll likely see different trims and options, along with prices for the vehicle you've selected. This will give you an idea of what pricing in your area looks like and can be helpful if you plan to negotiate car prices at a car dealership.
🚗 Tips for Negotiating a Used Car Price
Before negotiating, research the car’s market value using KBB, Edmunds, or Autotrader. Check the vehicle history report for accidents or maintenance issues that could impact price. When making an offer, start lower than the asking price but within a reasonable range. Be prepared to walk away if the price doesn’t meet your budget - dealers may come back with a better offer. If buying from a private seller, use any necessary repairs as leverage to lower the price.
🚗 Cut Expenses to Free Up More Savings
Finding extra money to put toward your car savings might be easier than you think. Start by looking at your monthly expenses to identify areas where you can cut back.
One of the biggest recurring costs for most drivers? Auto insurance. Here’s how you can lower your insurance bill and put those savings toward your car fund instead:
1️⃣ Shop Around for Better Rates – insurance providers calculate rates differently, so comparing quotes from multiple companies can help you find a lower premium. Even if you already have insurance, switching providers could save you hundreds of dollars per year.
2️⃣ Adjust Your Coverage – if you're driving an older car, consider whether you really need comprehensive or collision coverage. As a general rule, if your yearly premium is more than 10% of your car’s value, you might be overpaying.
3️⃣ Ask About Discounts – many insurers offer discounts for bundling policies, driving less, or maintaining a clean driving record. If you’re not sure what discounts you qualify for, call your provider and ask!
4️⃣ Improve Your Credit Score – in most states, insurers use your credit score to determine your rate. Raising your score by paying down debt and making on-time payments could help you lock in a better insurance rate.
5️⃣ Money-saving tip: check out these easy ways to supplement your income and put that extra cash toward your car fund!
🚗 Factor in Additional Costs Beyond the Purchase Price
The cost of owning a car doesn’t stop at the purchase price. Be sure to budget for:
1️⃣ Auto Insurance – the type of car you buy can significantly impact your insurance rate. Generally, newer and high-performance cars are more expensive to insure, while reliable, fuel-efficient models tend to have lower premiums. Shop around for the best low rate you can find.
2️⃣ Maintenance & Repairs – regular oil changes, tire rotations, and unexpected repairs can add up. Keeping an emergency fund for car-related expenses can prevent financial strain. Remember to keep this emergency fund in a HYSA!
3️⃣ Fuel Costs – if you commute regularly, choosing a fuel-efficient vehicle can save you hundreds of dollars per year.
4️⃣ Registration & Taxes – these fees vary by state but should be included in your total car ownership budget.
🚗 FAQs
1️⃣ Can you negotiate your auto insurance rate?
Yes! If you find a better quote from another provider, ask your current insurer if they’ll match or beat the rate. Many companies will lower your premium to keep your business.
2️⃣ When should I drop full coverage on my car?
If your car is worth less than $2,000, paying for full coverage might not make sense. Instead, consider putting that money toward future repairs or a new vehicle.
3️⃣ What happens if I cancel my car insurance?
If you cancel your policy early, you’ll typically get a refund for any unused portion. However, some companies charge a cancellation fee, so check your policy details before making a switch.
Btw - here's how others are doing👀
Would you rather: put down a downpayment for a fancy car or invest the money?
📈58% Invest my money
🚗42% Buy a car
Saving for a car requires smart budgeting, cutting unnecessary expenses, and making informed financial decisions. By reducing your auto insurance costs, setting up a dedicated savings plan, and finding ways to increase your income, you can reach your goal faster - and afford your new car with confidence!
Good luck,
Ben Manna
