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. From budgeting to goal setting, this page takes you through six easy-to-follow steps to saving for a car and how much money you might need to save.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

Are you saving for the full cost of a car or just a deposit? Are you planning to buy a new or used car? Will you trade in an old car? Thinking about these questions can help you work out what you can afford. To give an idea of how much to save for a car, a deposit is typically about 10 - 20% of its purchase price. You might also factor in the ongoing costs of running the car, including car insurance, fuel, tax, parking, and general maintenance.

If you are aware of your current monthly income and expenses, you can find areas where you can put some extra money towards your car savings. By putting all the numbers into a budget planner, you can see if your savings goal is achievable, or if you might need to cut back on spending or boost your income.

There’s no simple answer to “how long does it take to save for a car?”, but your budget and savings goal will provide insights into how much money you can realistically put aside each month without straining your financial situation. Say you are planning to buy a car in 12 months’ time. You’d simply divide your savings goal from step one by 12, and that will give you your monthly target.

Keeping your car fund in a separate account can stop you spending it on other things. If you’re planning ahead, putting a lump sum in a deposit account can also earn you a competitive interest rate. These accounts typically come with fixed terms of between six months and five years, but if you’re looking for the fastest way to save for a car, you can opt for terms as low as three months.

At Raisin Bank, you can compare and open savings accounts with competitive interest rates from banks across Europe, so you can find an account to match your timeline.

The monthly savings target you identified from budgeting your expenses can be transferred automatically to your chosen savings account. You can do this conveniently with a demand deposit account and savings plan. Some people choose to set up the amount to come out automatically on payday. That way, you’ll be consistently saving for your car every month.

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 saving the money could help you by reducing the loan repayment value.

Plus, the more cash you have upfront, the more negotiating power you’ll usually have with dealerships or private sellers who might offer a better price for a quick cash sale. And if you’re thinking about applying for a mortgage, a track record of saving is likely to look better than having a car loan on your credit report.

Research suggests that the cost of second-hand cars has increased by around 85% in recent years. Reports from 2024 show that the rate of growth has slowed, but prices are still much higher than they used to be*. This means that buying a car, new or used, is still a major. A good way to establish how much you should save for a car is to identify its type, make, and age. You could then check car comparison sites like DoneDeal or Carzone to see what similar new and used cars are selling for in Ireland.

When calculating how much to save for a car, it's helpful to take into account long-term expenses like car insurance and fuel costs. Electric cars, for instance, may have a higher price tag than petrol or diesel cars, but they can be cheaper to drive and require less maintenance over time. Moreover, consider factoring in vehicle tax and potential parking costs in your car budget. 

Finally, don’t forget that cars can break down at any time. You might put some savings aside in an emergency fund for those unexpected repair bills.

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. 

You can easily 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 from various partner banks.

*https://www.rte.ie/news/business/2024/0208/1431127-done-deal-car-price-index/