7 Steps to Save Up for a Car

Your dream car is out there, waiting for you. It’s a noisy marketplace, so planning and focus is a must when car shopping. Whether buying a van to haul the kids or a two-seat convertible for cross-country road trips, our checklist can help you save for your dream car.

1. Find the Car You Want

Maybe you need 4-wheel drive and a tow package to haul a boat. Or you want seat warmers and navigation. Use the list below to help determine what you want in your dream car. From there, you can start saving up.

  • Body style
  • No. of passengers
  • Gas mileage
  • Engine (hybrid, electric, gas, diesel)
  • Transmission (automatic or manual)
  • Drive train (4-wheel drive/all-wheel drive, rear-wheel drive or front-wheel drive)
  • Power equipment (windows, heated seats, seat adjustment, mirrors)
  • Towing capacity
  • Audio, Bluetooth and navigation
  • Storage capacity
  • Seat material
  • Exterior and interior color
  • Sunroof/moon roof
  • Safety features (some are critical when buying a family car)

2. Research Car Pricing and Financing

Before heading to the dealership, get online and research consumer organizations for information.

  • What are people really paying for the cars on your list? Make realistic offers and avoid paying too much.
  • Check safety ratings to understand your car’s reliability. Plus, your auto insurance may offer discounts for reliable cars that have certain safety mechanisms, such as airbags.
  • Look up free car history reports for vehicles you find online — dealerships often provide links. If buying from an individual, use the vehicle ID number to find its history.
  • Read reviews to see what others say about the vehicle’s performance.
  • If you need to finance some of the car, how much will you need to finance? How much do you want to pay each month and for how long?
Tip
Get a Car History Report
They don’t always include all accidents, but they can give you some indication of a car's background and help you decide if it's right for you.

3. Determine Your Car Budget

This step is crucial for budgeting for a car. Knowing your budget will allow you to plan for how long you’ll have to save up in addition to how much to save for a car.

First, get a copy of your credit report to confirm there aren’t any credit issues you should clear up. Typically, the better your credit, the better your interest rate. Then, get pre-approved financing from your bank, credit union or online lender. It could make it easier for you to negotiate with dealerships, since you’re a cash buyer. You can always check later to see if the dealership’s financing provides a better interest rate.

Narrow your search

Based on your preferred price tag and wish list, find three or four vehicles that fit the bill.

Take a drive

A short test drive is a first step, but you’ll want to know more before you buy. Most dealerships let you take an extended test drive — some even allow overnight use.

  • Take the route you usually take to work.
  • Make sure it fits in your garage. You can’t return a vehicle if you find out later it’s too big.
  • If you tow a boat or trailer on a regular basis, hitch it up and take it for drive to test its towing power.
  • Music lover? Play some tunes to hear if you get the sound you want.
  • Try out the 4-wheel drive, if the vehicle has it.

4. Keep Your Budget in Mind for Car Expenses

Budgeting for your car is more than just saving up for the cost of initially buying it. You’ll need to take into account any monthly payments you’ll be responsible for if you’re financing or leasing.

There are a few other expenses to take into account when considering your budget, including:

  • The cost of gas
  • Regular maintenance, like oil changes and tire rotations
  • Future repairs — for this, you’ll want to set up a savings fund
  • Car insurance

Car insurance is almost always required on a financed or leased car before you drive it off the lot, so be sure you know your dealership’s, bank or leasing company’s and state’s requirements for insurance. This will inform your budget because you may be required to purchase certain coverages that can add up to a steeper monthly bill.

Check with your insurance agent to see what kind of discounts you might be eligible for when buying car insurance for your new or used car.

5. Start Saving for Your Car

Now that you know what kind of car you want and how much it’ll cost you to own and maintain it, it’s time to start saving. We’ll go through just a few of the many ways you can start saving for your car.

How to save for a car

Keeping your goal in mind is the first step to saving up for your car. By sticking to your budget, you’ll stay on track to buy your first car. Here are some tips to help you save money:

  • Set your bank account to automatically send money to a savings account every month.
  • Cut back on eating out and make more meals at home.
  • Start a side hustle, like driving for a rideshare company.

6. Save at Least 20 Percent for a Down Payment

By saving at least 20 percent of the price of the car for your down payment, you’ll have a lower monthly payment and typically qualify for lower interest rates. Remember: price isn’t the only negotiable thing. You can ask for a better trade-in deal or interest rate, too.

7. Stick to Your Monthly Budget

Buying a car is just the first step in the long-term process of owning one. Remember those budget considerations you made earlier? Stick to them — they’ll help keep your overall budget on track and keep you from overspending.

Now that you have a plan to buy your dream car, there’s only one more thing you’ll need: car insurance. We can help with that. Connect with your American Family Insurance agent to get a quote and help protect what matters most.


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Related Topics: On The Road , Car Buying , Car Maintenance