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.

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 vehicleInterestMonthly payment for 60 monthsTotal cost
If saving$37,577Earn 2%$595.49$37,577
If borrowing$37,577Pay 4.21%$696$41,736

Used cars:

Cost of vehicleInterestMonthly payment for 60 monthsTotal cost
If saving$20,000Earn 2%$316.94$20,000
If borrowing$20,000Pay 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 Account Fee
Tangerine Savings Account
0.40%
2.5%
$0
None
Earn 2.5% interest for 5 months when you open your first Tangerine Savings Account by April 30, 2020. (up to a maximum of $1,000,000).
EQ Bank Savings Plus Account
2.00%
N/A
$0
None
Enjoy zero everyday banking fees, free transactions and no minimum balance with an EQ Bank Savings Plus Account.
Wealthsimple Cash
1.40%
N/A
$0
None
Earn 1.4% on any money you invest and withdraw your funds at any time.

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*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

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.

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