How to start saving for a car
Saving for a car is a significant commitment, and often the first step toward a major financial milestone, whether you’re ready to hit the road for the first time or need a more spacious ride for a busy household. But before you start browsing listings, it’s helpful to have a clear savings plan in place. Knowing how much you need, how long it could take, and where to grow your money turns the challenge of saving into a simple, rewarding path to the driver’s seat.
In this guide, we’ll walk you through how to save for a car step by step, from setting a realistic budget and working out your target, to factoring in ongoing costs like insurance, tax and maintenance. We’ll also explore the best way to save for a car, including how a savings account could help you reach your goal sooner.
How much should you save for a car?
The amount you’ll need to save for a car depends on your budget, the type of vehicle you’re considering, and what feels manageable for you in the long term.
A great starting point is to look at what you can comfortably afford without stretching your day-to-day finances too thin. To keep the process rewarding rather than overwhelming, set a target based on your actual income and regular outgoings.
Choosing between a new and a used car
Deciding between a brand-new model and a pre-owned vehicle is one of the biggest factors in your savings timeline.
| Factor | New cars | Used cars |
|---|---|---|
| Initial cost | A higher purchase price if bought outright; low-deposit finance may be available, but a larger deposit is typically needed to reduce monthly payments. | Generally lower purchase price, often requiring a smaller total savings amount to buy outright. |
| Features | Latest features, fuel efficiency and technology. | Features vary by age; they may lack the newest tech. |
| Cost of ownership | Typically experiences the steepest decline in value within the first three years. | Slower depreciation rate, as the most significant value drop has often already occurred. |
| Maintenance and warranty | Often includes a full manufacturer's warranty. | Potential for higher maintenance costs; warranties may have expired or require an additional fee. |
If speed is your priority, a used car could be the fastest route to the driver’s seat. However, if you prefer the long-term reassurance of a manufacturer’s warranty, it may be worth extending your savings window for a newer model.
While saving up for a car and buying it outright is a great way to avoid debt, it isn't the only option. Leasing or financing a car can be a faster way to secure your vehicle. Monthly car lease payments are often lower than car loan repayments, though it's important to remember that with a lease, you typically won't own the vehicle at the end of the term.
Running costs
Once you have a purchase price in mind, it's time to look at the costs of keeping your car on the road. These expenses vary depending on the vehicle and your annual mileage, so building them into your budget early prevents any unwanted surprises.
Typical running costs include:
- Fixed costs: Road tax, car insurance and breakdown cover
- Maintenance: Annual MOT tests, servicing and wear-and-tear repairs
- Daily use: Fuel or electric charging and parking permits
Looking at the total cost of ownership can make saving for a car feel even more achievable. This extra bit of preparation ensures that when you finally get the keys, you can move forward with total confidence.
How to build your car fund
Once you've determined how much you want to save, the next step is to transform that goal into an actionable plan. Saving for a car can be made easier by breaking it down into small, manageable stages.
1. Set a realistic budget
Start by looking at your monthly income and essential expenses, such as rent or mortgage payments, bills, food and travel. From there, you can see what's left over and decide how much you can comfortably put towards your car fund.
The key is to choose an amount that feels achievable. Saving too much, too soon, could strain your daily spending. Setting a manageable sum allows you to stay consistent without impacting your essential monthly budget.
2. Create your savings timeline
Setting a target date can give your savings plan more structure. Whether you’re hoping to buy your car in six months or two years, a timeframe lets you break your total goal into manageable monthly payments.
To find your starting point, simply divide your total savings target by the number of months until your planned purchase date. For example, if you need to save £3,000 over 12 months, your monthly savings target is £250.
Seeing the goal as a fixed monthly payment to yourself can help you track your progress. If your first calculation feels too high, you can adjust your timeline to find a timeline that works for you.
3. Commit to saving a set amount regularly
Consistency is often the most important part of saving for a car. Putting money aside regularly, even if it’s a modest amount, helps build momentum.
A straightforward way to stay on track is to set up a direct debit so your chosen amount is automatically transferred to a savings account each month. Automating your savings removes the temptation to spend the money elsewhere and makes progress feel effortless.
Keeping your car fund in a dedicated savings account can also help you stay organised and see your balance grow, which can be a great motivator as you move closer to your goal.
Maximise your savings before you buy
If you’d like to reach your car savings goal sooner, a few short-term adjustments can make a noticeable difference. You don’t always need dramatic changes. Small steps can help you build momentum and see your balance grow more quickly.
It can also help to keep your car fund in a separate savings account, where it’s clearly set aside and earning interest. Seeing progress build – and knowing your money is working for you – can help you stay motivated.
Here are a few practical ways to boost your car fund.
The spending freeze challenge
A short “spending freeze” can be an effective way to quickly top up your car savings. This might mean cutting back on non-essential spending for a set period. Consider reducing takeaways, subscription services or luxury purchases for a month.
Because it’s temporary, it can feel more achievable. Even a few weeks of more mindful spending could free up extra money to transfer straight into your car savings account, helping you move closer to your target.
Pause other savings goals
If buying a car has become a priority, consider temporarily redirecting contributions from lower-priority savings goals.
For example, if you’re regularly setting aside money for holidays or home improvements, pausing those contributions for a few months could help you build your car fund more quickly. Once you’ve reached your target, you can always restart your other savings plans.
Selling the old to buy the new
If you already have a car, selling it can significantly reduce the amount you need to save. Selling items you no longer need, from electronics to clothing, can provide an extra boost to your car fund.
Adding occasional extras, like a tax refund, birthday gift or even a cash-back reward, directly into your dedicated car savings account can make a meaningful difference. These small top-ups can add up quickly, helping to shorten your timeline and reach your savings goal sooner.
Why save for a car with an easy access savings account?
When you’re working towards a specific goal like buying a car, keeping your savings separate from your everyday spending can make a real difference.
An easy-access savings account allows you to set money aside for your car fund, while still giving you the flexibility to withdraw it when you’re ready to buy. This separation can help you stay organised and avoid dipping into your savings for other expenses along the way.
Another key benefit is earning interest. Instead of your car savings sitting in a current account, where they may gain little or no interest, an easy-access savings account allows your balance to grow gradually over time. While interest alone won’t replace regular contributions, it can give your fund an extra boost, helping you reach your target sooner.
Easy access also means flexibility. If your plans change, or you find the right car earlier than expected, you can withdraw your funds easily without worrying about exit fees or notice periods.
You can open an AA savings account online if you:
- Are a UK resident with a UK address
- Are aged 18 or over
- Have a UK mobile number
- Have UK tax residency only
- Have an open UK personal account that can be used as a nominated account
- Have a valid photo ID
Explore our easy access savings options and start building your car fund today.
FAQs
How long should I save before buying a car?
It depends on your target and how much you can save each month. Divide your total goal by your monthly contribution to estimate your timeline. For example, saving £500 a month towards a £6,000 target would take 12 months. Choose a pace that feels comfortable around your essential outgoings. Once you’ve found a monthly figure that works, setting up an automated transfer to your savings account could help you hit your target right on schedule.
What's the best type of savings account for a car fund?
An easy access savings account is often a practical choice when saving for a car. It keeps your savings separate from everyday spending, lets you withdraw the money when you’re ready to buy, and lets your balance earn interest while you save.
Can I use my savings as a car down payment?
Yes. Your savings can be used as a deposit if you’re buying a car on finance. A larger deposit can reduce how much you borrow and may lower your monthly repayments and total interest.