How To Save Money To Buy A Car: Tips And Tricks on Saving Money For a Car

Saving Money and Paying Cash for a Car


Paying cash for a car isn't a novel idea.  Generations before us did this all the time.  They didn't have things like credit scores or credit reports.  They usually paid cash for all their purchases except maybe their house. 

You'd be surprised how incredibly easy it is to budget for a car and save up the cash to pay for it lock, stock and barrel. 

What a great feeling, knowing you have no car payment! 

Let's look at the most efficient ways to save money for a car.

public domain photo
public domain photo

How to Save Up To Buy a Car

First decide on the kind of car you want and how much it will actually cost. You will have to decide if you want an environmentally friendly car, an inexpensive car, a used car, a new car.....what size, model, etc.

You'll also need to figure in things like fuel efficiency, maintenance costs, the depreciation value of the car, and insurance costs for whatever car you pick.

Remember if you decide you want to buy a new car, it'll depreciate as soon as you drive it off the lot.



Could you be happy with a car that has 10,000 to 40,000 miles on it and maybe is a year or so older? You'll save a bundle by doing this and the previous owner will have already driven it during its highest depreciation period.....right after the purchase and driving it off the lot.

Doing some preliminary homework on what kind of car and the costs associated with the car can really help you get the best buy out there. Check safety reports and places like Consumer Reports to see if the car of your dreams measures up in reality.

Once you have the car that you know you can't live without firmly in your mind, then start price comparing. Check newspapers, the Internet, car guides, etc. Make sure that you know what you're getting into before you start your savings plan. Getting an idea of what the car is actually worth is the most important step to starting your car budget.

Once you've done all the above....now you're ready to open a savings account. You can open a bricks and mortar account or an on-line savings account. Check on-line though because you can usually find an on-line account that will pay 5-6 times more interest than your bricks and mortar banks! If you find a great rate on-line, don't hesitate to take it to your bank or lender and ask them to match it. It's been known to happen every once in a while but you may have to stick with the on-line account! (On-line accounts are also insured by the FDIC)

Once you open your account, it helps if you name the account so you know where your money is going and how much it's accumulating as you save. Again, shop around and get the HIGHEST interest rate you can find per year so that you will make the most money on your car savings account.

Next, take the total projected cost of your car and divide it by whatever number of dollars you can comfortably pay per month for your car. Let's say that the car you have in mind is selling for $12,000. You feel that on top of your other bills and expenses, you can afford to put aside $300 per month for your car savings account. So using the figures of $12,000 with a savings of $300 per month, it would take you 40 months to save up for the car to pay CASH. No down payment, just pay for the car outright. That is only 3 years and 3 months to drive away with the car......no interest, just bottom line cash on the barrel head.

Again, you will have paid NO interest so thrown away no money on the car. The beauty is, you'll own it outright. You'll also have the added benefit of having made interest money back on the money that you put in for 3 years and 3 months. And you may arrive at your needed balance sooner than 3 years and 3 months as you accrue interest.

Obviously, if you can put away more than $300 per month, it'll take you a lot less time to get to your magical dollar value and drive away with the car that you own and never have to make a payment on!

It is possible to save money for a car and pay cash for it, incurring no debt whatsoever. A car is a depreciating asset so it pays to not have to throw more money at it by paying exorbitant charges in interest.

How to Save Money and Pay Cash for Anything

This is a great money-saving technique for anything.  It's pretty much the envelope system of savings that Dave Ramsey and other money gurus endorse. 

Instead of letting your money sit in your checking account while you're waiting for bills that come due, you can calculate amounts and open separate savings plans for paying bills, Christmas or vacation accounts, or even projects you have coming up. 

Your money will be earmarked for select things and can be easily deposited by direct deposit so you never feel the bite of taking the money out and transferring it. 

You can do this with anything....even your bills.  You basically estimate your bills for a 12-month period, divide the number by 12 and then have the money deposited right into a separate account called PAYBILLS let's say. 

Not only will you be straight on paying for things with cash and not incurring credit card debt, but the beauty of it is that you are actually earning interest on all your monies.  Your Christmas account or vacation account will be waiting for you to collect at the needed time but it will have even more in the account because you accrued interest. Especially if you have an on-line savings account.

Use this technique for your do-it-yourself house painting money account.  You could even find you have something left over or maybe that extra income will keep you from having to spend out of pocket on something else! 

Adopt this same plan of savings for a wedding or for buying a house.  You'd be surprised how over time you can watch your savings multiply and not have to worry where the money's coming from if you discipline yourself to set aside specific amounts for specific accounts....like buying a car.

Figure out the numbers and be sure to find the absolute best interest rates on savings accounts. 

Again, don't be afraid to negotiate for better rates or ask lenders to match rates. 

There are no penalties for withdrawing the money because these are savings accounts. 

If you decide you're going to skip a vacation this year let's say, keep growing your account by month and maybe the next vacation can be an even longer one!

Think about this savings plan for as many expenses or foreseeable debts as you can imagine in your financial future.

The envelope system as applied to buying a car is a fantastic way to develop good savings habits and end up without a car payment.

If you happen to have a trade-in when it comes time to buy the car you've saved up for, don't use it as a trade-in but instead, get the most for your money and sell it privately. You'll make money and you won't get ripped off by a low trade-in quote.

You can also use this method to come up with the down payment on your car if you don't want to wait to save the whole amount.  It's a great way to learn all about budgeting though if you get yourself into the mindset that you won't buy until you have the money saved up. 

Also never thinking beyond financing a car for more than 36 months teaches you to always stay within limits on buying any car.  Financing a car for longer than that is definitely a budget blaster and keeping within that 36 months will help you in the long run come up aces at budgeting.

Whatever you use this method for, think of it as saving money with no wasted interest charges out of pocket and instead, you're actually growing your money!

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Comments 11 comments

akirchner profile image

akirchner 5 years ago from Central Oregon Author

Micky - I think you're the smartest BY FAR! Safe riding.


Micky Dee profile image

Micky Dee 5 years ago

I'll take your great advice. Maybe I can buy new tires in the spring - for my bicycle. God bless dear akirchner!


akirchner profile image

akirchner 5 years ago from Central Oregon Author

That's (as usual) very, very funny....we have many envelopes that would be best not opened because they all go up in flames! Thanks BJ for stopping by!


drbj profile image

drbj 5 years ago from south Florida

I know all about the envelope system, Audrey. My husband and I used to have a special envelope in which we put money away each month for a boat we had purchased. For gas and repairs. Know what we labeled the envelope? "Hole Down Which We Throw Money."


akirchner profile image

akirchner 5 years ago from Central Oregon Author

Simone - it is kinda funny that these things are there and we just don't know what to call them! I have the Hubpages envelope system that I use for all my 'extras'.....too funny!


Simone Smith profile image

Simone Smith 5 years ago from San Francisco

Oh- the envelope system... very cool! I have been doing exactly that for ages, but hadn't thought that people had come up with a name for it. Thanks for sharing!


akirchner profile image

akirchner 5 years ago from Central Oregon Author

Thanks K9Keystrokes~! I think we all forget how simple things CAN be and we opt for the more modern (stress filled) approach!


K9keystrokes profile image

K9keystrokes 5 years ago from Northern, California

I really like your perspective that paying cash is not a "novel" idea. What a perfect retro appraoch to this modern topic! You have my vote Audry, for a very useful hub indeed. Good job!

K9


akirchner profile image

akirchner 5 years ago from Central Oregon Author

Thanks Pamela! Congrats again on your win!!

Thanks, Hanna! Good point!!


Hello, hello, profile image

Hello, hello, 5 years ago from London, UK

I believe in saving when buying a car. Nevermake the manufacturer rich hahaha


Pamela99 profile image

Pamela99 5 years ago from United States

Audry, Very good tips for saving up for a car.

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