How To Save For A New Car

*Updated 2026*

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.

How Much Should You Save For a New Car?

Summary: Most car buyers either save the full purchase price or aim for a 10–20% deposit if they plan to finance the car.

Before saving, calculate your target amount. Most buyers either save for the full purchase price or for a deposit if they plan to use car finance.

Typical targets include:

• 10–20% deposit if they’re financing a car
• Full purchase price if they’re looking to pay cash
• Extra savings for insurance, tax and fuel

Example:

Factor In The True Cost Of Car Ownership

Summary: The total cost of owning a car includes insurance, road tax, fuel, servicing, and depreciation in addition to the vehicle’s purchase price.

Buying a car involves more than the purchase price.

Typical UK yearly costs include:

• Insurance – costs around £737 on average
• Road tax - £195
• Fuel – costs around £747 to £1,300 depending on fuel type
• Servicing and maintenance - £473
• Depreciation - £1,251

The total cost of owning a car can reach upwards of £3,900 a year.

Understanding these costs helps you set a realistic savings target.

Take a look at our in-depth guide to car ownership.

Set A Monthly Savings Goal

Summary: Dividing your car savings target by the number of months you plan to save helps create a clear and achievable monthly savings goal.

Once you know your target amount, divide it by the number of months you plan to save.

Example:

Setting a monthly target can help break down a larger goal and make it look more achievable.

Use A Simple Budgeting Rule

Summary: Budgeting methods such as the 50/30/20 rule can help allocate part of your income toward saving for a car.

Many people follow the 50/30/20 budgeting rule:

• 50% of income on needs
• 30% of income on wants
• 20% of income on savings

A portion of the savings category could go directly into your car fund.

Short-Term Ways To Save Money For A Car

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.

Automate Your Car Savings

Summary: Automating transfers into a dedicated savings account helps grow your car fund consistently without relying on manual deposits.

One of the easiest ways to save for a car is to automate the process.

You can:

• Set up a standing order on payday
• Transfer money automatically to a dedicated savings account
• Use round-up features offered by banking apps

Automating savings ensures your car fund grows consistently.

Best Accounts For Saving

Summary: Using a separate savings account such as an easy-access account or Cash ISA can help protect and grow money set aside for a car purchase.

Use A Dedicated Savings Account

Keeping your car savings separate helps prevent accidental spending.

Options include:

• Easy-access savings accounts
• Fixed-rate savings accounts
• Cash ISAs for tax-free interest

Improve Your Credit Score Before Applying For Car Finance

Summary: Improving your credit score before applying for car finance can increase approval chances and reduce the interest rate on your loan.

If you plan to finance your car, a higher credit score can lead to lower interest rates.

• Check your credit report for mistakes and fix them.
• Set filings on the electoral roll to strengthen identity checks.
• Use direct debits to ensure your payments are always on time, it helps your score and looks good to lenders.
• Keep credit use low: aim for under 30% of your limits.
• Build a healthy payment record with utilities, credit cards, and small loans.
• Save a deposit: even a few hundred pounds shows responsibility and can improve your terms.

Time Your Car Purchase Carefully

Summary: Buying a car during quieter sales periods or registration change months can help reduce the total purchase price.

Dealerships often offer better deals:

• At the end of a quarter. March, June, September, and December are quarter-end months, and manufacturers often offer extra bonuses or targets to push sales during these times.
• During new plate releases in March and September. Dealers want to shift the ‘old’ stock to make room for the new plate versions. There’s usually a rise in trade-ins, giving you a larger selection of nearly-new cars to choose from if you’re open to recent models with a few miles on the clock.
• End of the year. December may seem like an odd time to buy a car… but it’s often one of the best. Many people are focused on Christmas, not cars, which means dealerships are quieter. Combine that with end-of-year sales targets and the need to clear stock before January, and you’ve got a perfect recipe for negotiation.

Buying at the right time can reduce the amount you need to save.

Take a look at our specialised car buying guide – The Best Time To Buy A New Car In 2026.

The Finance Route

Summary: Car finance allows buyers to spread the cost of a vehicle into monthly payments instead of paying the full purchase price upfront.

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

Summary: Used cars are often cheaper than new cars because they have already experienced the steepest period of depreciation.

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.