How to save money for a car

Craving adventure? By all means, hit the road, Jack. But first, let's talk about ways to save up for the car that'll take you on that journey — or just on your weekly shop.

A car purchase may feel out of reach now, but there are ways to stretch your budget a bit further and find cost-effective ways to reach that goal. All it takes is a little saving and strategic spending.

In this article, we'll give you some practical tips that'll help you save up for your car. You'll learn everything from budgeting strategies to clever ways of finding the best car deals out there.

We'll also show you how to put your money to work for you with Revolut Instant Access Savings. Not only will it help you earn interest on your balance, but it'll also give you powerful budgeting tools that'll put you in the driver's seat — figuratively and literally.

1. Open a savings account for your car fund

Plot twist — instead of starting with a budget, kick off by opening a savings account as soon as the thought of getting a car pops into your mind. At this point, you might not even know what kind of car you want or how much money you'll need, but being proactive is key.

Why? Because the money you put into a savings account may earn interest. The longer it's there, the more you'll earn. It won't get you a Ferrari overnight, but it'll add up over time. If you want to give your car budget a boost before it's even born, start saving early.

Keeping your car fund separate from your everyday spending money will also make it easier to stay on track. If your car savings are in a separate account, you're much less likely to dip into them when you're out shopping.

Revolut Instant Access Savings is one option to check out. You'll earn up to 5% AER¹ variable on your GBP balance, with interest paid daily and instant access to your funds. You're free to add money at your own pace and make withdrawals whenever you need to — without any fees, penalties, or minimum balances to watch out for (T&Cs apply).

Besides competitive interest rates, you'll also get access to in-app budgeting tools that'll help you track your progress and meet your goals. You can create expense categories, set limits for each one, and get insights into your spending trends without spreadsheets or number-crunching. All the tools you need to power up your car fund are right in the app.

¹ The Annual Equivalent Rate (AER) shows the interest you can earn over 1 year. AER is compounded, so you’ll earn interest on interest already earned. Rates depend on your plan type, from up to 4% on our Standard plan to up to 5% on our Ultra plan. Paid plan subscription fees and T&Cs apply. Interest offered is subject to change and any interest earned is liable to the applicable taxes. T&Cs apply.

📚 New to savings accounts? Find out what AER means and how you can use it to calculate your interest earnings.

2. Assess your financial situation

Before you start eyeing that shiny red coupe, step back and have a look at your bank account. While this may feel like a screeching stop, it's not about putting a damper on your dreams — it's about laying out a realistic plan that'll help you achieve them in a cost-effective way.

And it all starts by getting a clear picture of your finances. Here are some practical steps to help you do that.

• Understand your sources of income.
  First things first — see exactly how much money you're bringing in each month. This includes your salary, any side hustles, freelance work, and any other sources of income. Make a list of all your income streams and calculate your total monthly income.
• Have a close look at your spending habits.
  Track all your expenses for a month and break these down into categories. You can start by separating your fixed costs (like rent and utilities) from your variable expenses (like dining out, entertainment, and shopping).
• Determine how much you'd be able to spend on a car right now.
  Based on your current account balance, your income, and your expenses, how much could you comfortably afford at the moment? Put that into your savings account straight away to set it aside.
• Decide how much you can save each month.
  Subtract your total expenses from your income. From that amount, how much can you afford to put into your car fund? If you're not sure, start small and work your way up. This amount may change once you decide which car you want and how much you're going to need.
• Explore ways to increase your income.
  This might involve negotiating a raise, freelancing, taking on a part-time job, selling unused items, or renting out a room in your home.
• Find ways to reduce your daily expenses.
  Try meal-prepping, buying things in bulk, looking for coupons and sales, and cancelling subscriptions you don't use any more.

3. Research and compare different cars

Once you have an idea of what your budget looks like, it'll be much easier to narrow down your choices. Determine which features you need in a car and which budget-friendly options will help you get those.

Choose a few models and start shopping around to further hone in on your savings target. Websites like CarWow can offer valuable insights and comparisons. Look up the manufacturer's suggested retail price and compare it with any offers you might find to gauge whether you're getting a fair deal.

At this point, you just need a rough idea of your price range. The key is having a clear savings goal and knowing how to spot cost-effective deals when you're ready to buy.

4. Look into different payment options

Wondering what the best way to buy a car is? That depends entirely on your personal circumstances. There are several payment options out there, and some might not even be on your radar. Let's go over some of these so you can make an informed choice.

• Cash purchase
  Paying for a car in full and out of pocket clearly has its benefits — no interest payments, no debt, no financial commitments. But, if your savings are tight, this option can put a lot of strain on your bank account. If you do want to pay for your car upfront, make sure you'll still have money left over for any unexpected costs. This might require postponing your purchase to save a little longer.
• Financing
  A loan can help give you a bit of breathing room and spread out the costs over time. Just remember — interest payments can add to the total cost, and you'll have a monthly payment to manage. Crunch some numbers, then weigh the costs and benefits of financing before you decide.
• Leasing
  This is an option that might not have crossed your mind. Renting a car usually costs less than financing, and maintenance is often included. Just keep in mind that you won't own the car, and there may be mileage restrictions.

5. Map out a savings plan

After you've researched different cars and payment options, you'll have a clearer idea of how much money you'll need. This is where an actionable savings plan comes in. Having a specific goal to work towards will keep you on track. Here are some steps you can take to get there.

• Set a target.
  Consider this your north star — the amount you'll need to save to purchase the car. Be realistic about what you can afford, and consider any other financial commitments you may be juggling. Take additional expenses like insurance, maintenance, and interest payments into account.
• Create a timeline.
  How long will it take you to save enough money to meet your goal? Set a date to keep yourself motivated.
• Commit to saving a set amount regularly.
  How much do you have to set aside to reach your goal within that timeline? Break down your savings target into manageable chunks to set a realistic monthly savings goal.

6. Automate your savings

If you're having trouble parting with that chunk of your monthly pay cheque, here are some tips that'll get you into the habit of saving money for a car without even noticing.

• Set up automatic transfers to your savings.
  Many savings accounts let you schedule automated transfers every month, so you can send part of your pay cheque to your car fund as soon as it lands.‌ With Revolut Instant Access Savings, you can schedule these right in-app and time them to perfection. Set them up daily, weekly, or monthly, and change the amount whenever you need to. It's a great way to save without even thinking about it.
• Take advantage of features like spare change round ups.
  If you're using Revolut, turn this feature on in-app to save a bit more. Whenever you make card payments, your purchases will be rounded up, and the difference will be sent to your savings account. Those pennies add up, and so does interest.

7. Shop strategically to save on your car purchase

Saving up for your car is key, but a little bit of strategic spending will make that money go a long way. If you've got some cash left over after your purchase, that's just more to stash in your savings account for future repairs or insurance payments.

Here are some little-known tricks that can help you find great car deals.

• Time your purchase wisely.
  The time of year can significantly impact the price of a car. Dealerships often offer better deals at the end of the month, quarter, or year when they're trying to meet sales quotas. Buying a car at the end of its model year can save you money. At that point, dealers are eager to clear out old inventory to make room for new models.
• Consider used or certified pre-owned cars.
  Buying a used or certified pre-owned (CPO) car can save you thousands of pounds compared to a new car. CPO cars are typically late-model vehicles that have been inspected and refurbished by the manufacturer. They often come with extended warranties and other perks.
• Look for incentives and rebates.
  These can include cashback offers, low-interest financing, or special lease deals. Check the manufacturer's website and ask the dealer about any incentives.
• Trade in your old car (if you have one).
  This can help reduce the cost of your new purchase. Research the value of your old car using tools like CarWow, and negotiate the trade-in value separately from the price of the new car.
• Avoid unnecessary add-ons.
  Dealers often try to sell add-ons like extended warranties, rustproofing, and paint protection. These extras can add hundreds or even thousands of pounds to the price of the car. Only purchase add-ons that provide real value to you.
• Shop around for financing.
  Don't automatically accept the financing option offered by the dealer. Credit unions and online lenders often provide competitive rates, so do your research to get the most out of your money.
• Get quotes from several insurance providers.
  Comparing various options is the best way to save money on car insurance. While these long-term costs may take a backseat when you're focusing on achieving your purchase, remember that any discounts you may get here will add up in the long run.

Jumpstart your car fund with Revolut

Ready to save up for your car? The sooner you start, the sooner you'll reach your savings goal — and Revolut Instant Access Savings can help you get the most out of your money.

You can grow your savings on auto, make one-off transfers, and even save while you spend with spare change round ups on your purchases — all while racking up interest daily. You'll also get in-app analytics tools that'll help you track your progress and meet your goal.

With two-factor authentication and biometric technology, your account offers a safe space to keep your savings. For extra security, you can enable Wealth Protection to require selfie verification every time you withdraw money.

It's a great way to watch your balance grow — every single day.

📚 Saving up for something else? Check out our guides and explore some little-known money-saving tips.

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