How to save for a car: a complete guide

There are a number of ways you can finance the purchase of a car, from buying it outright to using finance. While people often opt for car loans, you don’t have to worry about monthly repayments if you have saved for and bought the car yourself. This page looks at the benefits of saving for a car, and how long it might take you. 

Saving for a car could significantly reduce your payment obligations. If you’re able to pay outright, you can save on interest payments and instead use that money to buy the car. Taking out a loan is always an option, but savings could help you by reducing the loan repayment value.

Research suggests that the cost of second-hand cars has increased by almost 80%* post-pandemic. This means that buying a car, new or used, is more expensive than ever. A good way to establish how much you should save for a car is to identify its type, make, and age. 

If you're contemplating setting aside funds for a car, the first step is to establish your savings goals. Are you aiming to save the entire purchase amount, or just a down payment? For example, since down payments typically range from 10-20% of the total car price, this provides a clear target to focus on. To prevent setting an overly ambitious monthly savings target, start with an amount that feels comfortable and consider increasing it gradually if feasible.

When calculating how much to save for a car, it's helpful to take into account long-term expenses like insurance and fuel costs. Moreover, consider factoring in vehicle tax and potential parking costs in your car budget.

How long it takes to save for a car depends on your savings goals and the amount you decide to save. One way is to calculate your monthly income and fixed expenses to factor in what portion of it you can put away. Creating a budget is another way to stay on track of your expenses and savings goals. You may even wish to revisit the budget to make adjustments based on your circumstances. 

A lump sum amount can be put into a fixed term deposit or deposit account that typically has a timeframe of six months to five years. This gives you a good overview of savings timelines. 

It’s important to consider that a loan could mean you take longer to pay it off than you would to save up.

If you want to save for a car, start as soon as you can. The earlier you begin, the more money you can save for a down payment, which makes buying a car cheaper. Some tips for saving for a car include cutting back on spending, like eating out or buying coffee often, to save more each month. If you want to save money for a new car more effectively, think about opening a savings account. Look for one with a fixed interest rate because it can help you earn more money and reach your financial goals faster.

You will find various types of savings accounts for a car in Ireland. You may wish to consider a fixed term deposit account that requires you to lock away your money for a set period of time, in return for a higher interest rate. Other options, such as demand deposits, are more flexible as you can withdraw your money when needed. At the same time, savings bonds or other state savings products work well for short-term savings goals. 

To swiftly and effortlessly set up a savings account to save for a car in Ireland, register with Raisin Bank today. Our platform offers a selection of savings accounts featuring competitive interest rates, provided by various partner banks.

*https://www.irishtimes.com/your-money/2023/04/12/second-hand-cars-almost-80-more-expensive-than-pre-pandemic-times/