How to save for a car

Set your spending goals and start budgeting early for your next ride.

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The more money you have upfront to pay for your car, the less you’ll have to borrow — saving you money in the long run.

EQ Bank Savings Plus Account

  • Account fee: $0
  • Min. deposit amount to open account: $0
  • Max. balance amount: $200,000
  • Account type: Savings
  • No monthly fees
  • Unlimited transactions
  • No minimum account balance

EQ Bank Savings Plus Account

Enjoy free and unlimited daily transactions, no fees and no minimum balance with an EQ Bank Savings Plus Account.

  • Account fee: $0
  • Min. deposit amount to open account: $0
  • Max. balance amount: $200,000
  • Account type: Savings
Promoted

How to save for a carWoman looking through for sale car window

1. Determine what you can afford and set a goal

Determine how much you want to spend on a car and check out makes and models that fit your budget. Figure out how much you want to have for a down payment and what you can afford to borrow.

2. Consider other car-related expenses

Beyond the cost of the vehicle, remember to put extra money aside for things like insurance, repairs and maintenance. How much you’ll pay for insurance depends on factors like your age, where you live, what you drive and your driving record.

3. Set a timeline

Set a purchase date and break down the total amount you want to save into monthly payments. Make sure the amount fits into your budget and won’t leave you strapped for cash. Try considering these savings deposits as a mandatory expense in your budget to help keep you on track and focused on saving.

4. Pick a savings account and make regular contributions.

Find an account that works for you by considering how much you have to open the account, how much you plan to save and how easily you want to access your money.

How much should I save for a car?

How much you should save for a car largely depends on if you want to pay for it in full or take out a loan. The average cost of a new car was $39,851, according to a October 2019 Price Index report by autoTRADER.ca.

The same Price Index noted that the average price of a used car was $18,800. Like anything else, how much you’ll spend depends on what you’re looking for and what you can afford. Here’s an average of what you could pay for a car based on how much you can save or need to borrow.

New cars:

Cost of vehicle Interest Monthly payment for 60 months Total cost
If saving $37,577 Earn 2% $595.49 $37,577
If borrowing $37,577 Pay 4.21% $696 $41,736

Used cars:

Cost of vehicle Interest Monthly payment for 60 months Total cost
If saving $20,000 Earn 2% $316.94 $20,000
If borrowing $20,000 Pay 6.96% $396 $23,739

Beyond the cost of the vehicle, you should also account for other expenses that will increase the amount you’ll need to save. Note that these values are only examples. The actual costs will depend upon a number of factors such as your age, where you live, what kind of car you drive, your driving record, and your driving habits:

  • Car insurance: $1,500 per year
  • Maintenance: $1,200 per year
  • Gas: $1,500 per year

Accounts to help you save for a car

When shopping around for a savings account, watch out for account fees. Compare key features such as eligibility criteria, rewards and bonuses, special programs and accessibility to your funds.

Name Product Annual Interest Rate Promotional Interest Rate Minimum Balance Fees
Tangerine TFSA
1.05%
2.75%
$0
None
Earn 2.75% interest in your first Savings Account for 5 months (up to a maximum of $1,000,000) as a new Tangerine client. Offer expires April 30, 2020.
Tangerine RSP
1.05%
2.75%
$0
None
As a new Tangerine client, earn 2.75% interest in your first Savings Account (including RSP) for 5 months up to a maximum of $100,000. Offer expires April 30, 2020.
Tangerine Savings Account
1.05%
2.75%
$0
None
Earn 2.75% interest for 5 months when you open your first Tangerine Savings Account by April 3, 2020. (up to a maximum of $1,000,000).
EQ Bank Savings Plus Account
2.30%
N/A
$0
None
Enjoy free and unlimited daily transactions, no fees and no minimum balance with an EQ Bank Savings Plus Account.

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Tips on saving up for a car

Once you have a goal in mind, there are a number of ways you can save up for your purchase:

Bottom line

Make saving for a car a little less daunting by starting early and setting goals. Once you’re ready to open an account, compare savings accounts to find a product that’s right for you.

Frequently asked questions

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