How To Save For A New Car

👉 Short-term Saving
👉 Long-term Saving
👉 The Finance Route
👉 Final Word

The average new car in the UK will cost anywhere from £19,000 to £33,000, with used models going for £16,000 to £18,000 on average. This is a sizeable chunk of money, so saving as much as possible is key to getting your hands on your dream car. We’ve covered some savings tips to get started on straight away, as well as some long-term options that really add up the pennies over time.

Short-term Saving

There’s plenty you can do in the short term to gain much-needed financial respite 👇.

✔️ Cut down on meals out. Going out for food is fun and exciting, but it can hurt your bank account, especially if you frequently go out. Consider cooking at home to save cash and use apps like Too Good To Go to get your hands on restaurant quality food at a discounted price. Swapping restaurants for your kitchen can save you hundreds of pounds a month, which could directly go towards your car saving pot.

✔️ Cancel unused subscriptions. We’ve all signed up for something and forgot about it, but this could be a way to get back some much needed cash every month. These small costs add up, and getting rid of subscriptions can provide immediate financial relief.

✔️ Look for cheaper household utility bills. Comparison sites are everywhere, and utility providers are always offering discounts and savings to those who switch providers. Have a look at the market and see if you can get the same service for less. In the case of utility bills, this could help you save hundreds of pounds a month.

✔️ Sell unused household items. Sites like Vinted are great at turning last year's wardrobe into spare cash. Although the income won’t be huge, it’s better than nothing and gives you a decent chunk of money for fairly minimal output.

✔️ Make use of cashback schemes like TopCashback. You can sign up to this completely free, and earn up to £300 a year in cashback from certain UK shops.

If you try these saving methods, your bank account will thank you over time, and you’ll be much closer to that new car.

Long-term Saving

Long-term saving usually means putting money aside for 5 to 10 years. But the earlier you start, the faster you’ll see your money grow.

✔️ Start a saving scheme. There’s plenty of great examples of saving schemes online. A great one is Monzo's penny challenge. The way this works is pretty simple: the first day, you put away 1p, the second day 2p and so on. By day 365, you’ll be putting away 365p. This doesn’t seem like a lot every day, but by the end of the year, you’ll have saved £667.95. If you try this method for a couple of years, you could have yourself an initial deposit for a new car!

✔️ Investing. This one carries more risk but can be a good way to turn small funds into a larger pot. A stocks and shares ISA can help you invest in successful companies and build funds over time. Of course, success isn’t guaranteed, and investing is at your own risk.

The Finance Route

If you’re looking for a car quickly, finance can be a great option. With car finance, the purchase price of a car is spread across monthly payments and a potential deposit, paid over a number of years, making it more affordable than an outright purchase. Marsh Finance also offer no deposit car finance, a good option if you’re looking to avoid a large initial down payment. Just be aware that no deposit car finance will likely include higher monthly payments or longer terms.

Here’s an example of how used car finance works with Marsh Finance:

Let’s say you want a used car for £16,000 (average UK price). You want to repay over four years (48 months), and you have an average credit score. Your monthly repayments would be £465.

As you can see, a large upfront cost can be spread into affordable chunks that could be paid with the savings you have made from following the tips above!

New Vs Old Cars

Car finance is popular for both new and used cars, but with new cars, there’s a risk of depreciation. Depreciation is the rate at which a car loses value over time. Typically, new cars depreciate heavily in the first few years, and this can hurt a personal contract purchase car finance agreement if the car ends up falling in value quicker than expected. With this in mind, many people opt for a used car that has already gone through the initial depreciation stage.

Regardless of the car you choose, car finance can be a great way to finance a car deemed too expensive up front, but more than affordable when spread across multiple years.

A Final Word On Saving For A New Car

A new car is a big financial commitment, pushing many to build up a savings pot. With the tips provided in this guide, you should be able to save a small chunk of cash a month, which over time adds up to a larger sum. Our tips are relatively easy to complete and can get you right on track to your new car.

If you’re interested in seeing how car finance could look for you, our calculator can show you expected interest rates and repayments, helping you set a realistic savings target.