How Much Money Should You Save Up to Buy a Car?

How Much Should You Save for a Car?

There's no right or wrong answer when it comes to the exact amount you should save for a car. However, there are some upfront costs you'll need to plan for when deciding how much to save.

Down Payment

Experts generally recommend putting a down payment of at least 20% on a new car and at least 10% on a used car. New cars generally lose about 20% of their value in the first year of ownership, so a 20% down payment helps prevent you from getting upside down on your auto loan—that is, owing more money on the loan than your car is worth.

Of course, you can make a bigger down payment if you like. A larger down payment means borrowing less, which can reduce your monthly payment, loan term and interest rate. In other words, paying more upfront could ultimately save money.

Do you have a car to trade in? Depending on how much the car is worth, this could greatly reduce how much you need to save for a down payment. You can use automotive websites like Kelley Blue Book or Edmunds to estimate your car's trade-in value. Selling your car to a private party could net you more money, although trading it in is more convenient.

Learn more: How to Trade In Your Car

Sales Tax

Most states charge sales tax on auto sales. (The exceptions are Alaska, Delaware, Montana, New Hampshire and Oregon.) There may also be local sales taxes that apply. Sales tax generally isn't included in the car's sticker price, so you'll have to factor that in when deciding how much car you can afford. Your state government website should have information about sales tax rates in your area.

Title and Registration Fees

When you buy a new or used car, you're generally required to pay a registration fee to your state's department of motor vehicles. The registration fee pays for license plates, registering the car and getting the vehicle's title. It may be a flat fee or based on the vehicle type, depending on your state. Visit the website of your state's department of motor vehicles for more information to help you estimate the registration fee for the car you plan to buy.

Dealership Fees

In addition to title and registration fees, many dealerships charge their own fees. These might include:

• Destination fee for transporting the car to the dealership
• Document or conveyance fee for processing paperwork
• Advertising fee
• Fabric protection fee
• Paint protection fee
• Vehicle identification number (VIN) etching fee
• Rustproofing fee

You may be able to negotiate some of these fees or negotiate the price of the car to offset them—or avoid them altogether by declining add-on services such as rustproofing or paint protection.

Learn more: How Much Should Your Car Payment Be?

Car payment calculator

How Much Should You Spend on a Car?

It's typically advised to spend no more than 10% to 15% of your monthly take-home pay on transportation-related expenses. For example, if your take-home pay is $5,000 per month, you should spend no more than $500 to $750 per month on transportation, including the following expenses:

• Car payment: Auto loan terms range from 36 to as much as 96 months. Choosing a longer loan term can lower your monthly car payment, but it also means paying more in total interest. Making a bigger down payment, choosing a less expensive car or buying a used car are better ways to lower your monthly payment. You can use Experian's car payment calculator to see how different loan terms, down payment amounts and other factors might affect your monthly payment.
• Insurance: On average, car insurance costs $2,304 annually, according to 2025 Experian data. A minimum amount of auto insurance is required in most states, and when you finance a car, the lender generally requires getting collision and comprehensive insurance too.
• Fuel: You can estimate fuel costs based on the fuel efficiency of the car you plan to buy, your annual mileage and current gas prices. Fuel costs can vary, but average fuel costs in 2023 were $2,449, according to J.D. Power. For electric vehicles (EVs), you'll need to factor in the cost of electricity (and installing a home charging station, if you don't already have one). Kelley Blue Book estimates home charging for EVs costs an average of $823 annually; using public charging stations typically costs more.
• Maintenance and repairs: You'll want to keep your new car in top shape by getting the regular maintenance the manufacturer recommends. A good general guideline is to budget $100 per month for maintenance and repairs. As the car gets older and more likely to need repairs, you may want to set aside more.

Learn more: What Is the Total Cost of Owning a Car?

How to Save for a Car

If you plan to buy a car in the near future, it's a good idea to start saving for it now. Here are some tips for saving up to buy a car.

• Set a target goal. If you plan to buy a car in six months and want to make a $4,500 down payment, you'd need to save $750 a month to reach your goal.
• Make a budget. List out your monthly income and expenses, including essentials such as groceries and discretionary spending such as entertainment. Subtracting expenses from income will show you how much extra money you've got to work with.
• Adjust your goal if needed. If your goal isn't realistic given your budget, you'll need to either:
  • Wait longer to buy the car. If you plan on making a $4,500 down payment, you could save $375 per month instead of $750 and reach your savings goal in one year.
  • Reduce spending. Spending less on entertainment or eating out, canceling unused subscriptions, cutting utility usage and eliminating impulse purchases can free up cash. Save just $12.33 per day—which could be as easy as bringing your lunch to work instead of buying it—and you can sock away $4,500 by the end of the year.
  • Boost your income. Ask for more hours at work, apply for a better-paying job or a promotion, or get a part-time job on the side. You can also earn extra income with a side hustle such as dog walking, tutoring, babysitting, freelancing or selling things online.
• Set up a savings plan. Schedule automatic transfers into your savings account every payday to save without even thinking about it. Consider opening a high-yield savings account to earn a higher annual percentage yield (APY) on your funds so you can save even faster.
• Improve your credit. Having good credit (a FICO^® Score^☉ of 670 or higher) can increase your chances of getting an auto loan at lower interest rates, which can save you money. Paying down debt, paying your bills on time and bringing late payments current can all help improve your credit score.

Learn more: Simple Ways to Save Money

Get Your Credit Ready to Buy a Car

A good or exceptional credit score can give you more options when it comes to getting an auto loan. As you save up to buy a car, use the time to work on your credit score too. Start by checking your credit report and FICO^® Score for free and making sure your credit report is up to date. If your credit score needs a boost, reducing your credit utilization ratio and making timely payments can help increase it.

Experian Boost^®ø, a free feature that adds your eligible insurance, rent, phone, utility and streaming service payments to your Experian credit report, may also help improve your FICO^® Score. To track your progress, you can sign up for Experian's free credit monitoring service. You'll get alerts to changes in your credit score and tips on how to improve it, helping to put you on the road to getting a favorable auto loan.