How much you should save up to buy a car depends on whether youâre buying a new or used vehicle, whether you have a trade-in and how much you can afford. Saving up for a down payment of at least 20% for a new car and 10% for a used car is generally recommended.
Theres no magic number when it comes to how much to save up to buy a car. The amount you should save up for a car depends on several factors, including whether youre buying a new or used car, whether you have a trade-in and how much you can afford to spend. Heres what you need to know to figure out the right savings goal for buying a car.
Buying a car is one of the biggest purchases many people will make. With the average price of a new car around $47,000 in 2025, it’s important to figure out how much you can realistically afford before heading to the dealer. This article will discuss key factors to consider when determining how much money you should have to buy a car, including budgeting, financing, down payments, and additional costs beyond just the sale price.
Set a Budget Based on Monthly Payments
When buying a car, most experts recommend limiting your auto loan payment to no more than 10-15% of your take-home pay. This includes not just the loan payment, but also insurance, gas, and maintenance costs.
For example, if your monthly take-home pay after taxes is $4,000, you would want to limit your total monthly car costs to $400-600. This means if you get a loan payment for $300 per month, you would need to budget the remaining $100-300 for insurance, gas, repairs, etc.
Some other guidelines to consider:
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The 20/4/10 rule suggests limiting car payments to 10% of your gross monthly income and total car expenses (loan, insurance, gas) to 20%.
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Compare potential payments to what you currently pay for transportation if you have a car now Can you afford an increase, or do you need to keep payments the same?
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Use an auto loan calculator to estimate payments based on car price, down payment, loan term, interest rate, etc.
Save Up a Down Payment of 10-20%
Putting money down upfront can lower your monthly payments as well as the total interest paid over the loan term Experts suggest saving up a down payment of at least 10-20% of the car’s price.
For example, on a $30,000 car, you would want to save $3,000-$6,000 for the down payment This will also show lenders you are financially responsible
If you’re unable to put 20% down, aim for at least 10%. Every little bit helps reduce payments. You can also get a shorter loan term like 3 years to compensate for a lower down payment.
Factor in Fees, Taxes and Additional Costs
Beyond just the sale price, there are other costs to factor in when determining how much money you need to buy a car:
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Sales tax – Typically 5-10% of the car’s purchase price.
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Title, registration and license fees – Can be several hundred dollars depending on your state.
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Dealer fees – Documentation or destination fees average around $500 but can be as high as $1,000.
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Auto insurance – Budget approximately $100-$200 per month for full coverage insurance. Get quotes before buying.
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Gas budget – Calculate expected monthly fuel costs based on mileage. Fuel efficient cars save money.
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Maintenance budget – Budget 1-2% of the car’s value annually for routine maintenance and repairs.
Weigh the Pros and Cons of Buying vs. Leasing
Another factor to consider is whether buying or leasing makes more sense for your finances:
Pros of buying:
- You own the car and can keep it as long as you want
- No mileage limits
- Can eventually sell or trade-in the car to put toward next purchase
Pros of leasing:
- Lower monthly payments compared to buying
- Drive a newer car more often (every 3 years typically)
- Lower down payment needed (often first month’s payment)
Cons of buying:
- Higher monthly payments than leasing
- Stuck with the car after loan is paid off, even if you’re bored of it
Cons of leasing:
- Never build any equity in the car
- Strict mileage limits typically 10k-15k miles per year
- Extra fees if you damage the car and want to turn it in at lease end
Look at your budget, driving needs, and how often you plan to get a different car to decide if leasing or buying is better for your situation. Leasing works well if you want a new car every few years. Buying can make more sense if you drive a lot of miles or want the freedom to resell the car later.
Have a Prime Credit Score to Get the Best Interest Rates
Your credit score plays a big role in determining how much you’ll pay to borrow money and buy a car. The higher your credit score, the lower your interest rate will be on an auto loan. People with “prime” credit scores of 660 and above get the best rates.
Here are average new car interest rates by credit tier according to Experian in 2025:
- Prime (660-719) – 5.07% APR
- Super Prime (720+) – 3.77% APR
- Non-prime (620-659) – 8.62% APR
- Subprime (below 620) – 13.95% APR
As you can see, a prime or super prime credit score can save you thousands in interest over the life of an auto loan. Before buying a car, check your credit reports and scores so you know where you stand. If your score is lower, give yourself 6 months or more to improve it before applying for an auto loan.
Have an Emergency Fund for Unplanned Costs
Owning a car comes with surprise expenses like repairs and tickets. Make sure you have a rainy day fund established to cover unplanned costs without going into debt. Experts suggest having 3-6 months of living expenses saved in an emergency fund.
If your budget is already stretched just trying to handle the payment, insurance and gas on a car, it’s a sign you may be over-extending your finances. Try to improve your financial standing before taking on a car loan you can’t comfortably afford.
Follow the 10/20/48 Rule as an Affordability Check
Finally, a general guideline that financial experts recommend is limiting your:
- Monthly car payment to 10% of your gross monthly income
- Total monthly car costs (loan, insurance, gas) to 20% of gross income
- Loan term to 48 months or less
So for example, if you make $4,000 per month:
- Car loan payment should be under $400
- Total car costs under $800
- Loan term no more than 4 years (48 months)
This 10/20/48 rule helps account for all aspects of affordability. Following it can protect your finances from being overloaded by auto costs.
The Bottom Line
How much money you need to buy a car depends on many factors – your budget, income, debts, credit score, loan terms, and more. While rules of thumb like 10/20/48 exist as guidelines, carefully consider your entire financial situation. Determine what affordable monthly payment makes sense for you. And be sure to factor in all additional costs like insurance, gas, maintenance and repairs.
Buying a car is exciting, but don’t let emotions cloud your judgment. Crunching the numbers upfront helps ensure your new wheels align with both your transportation needs and your budget. By setting realistic expectations for how much you can afford, you’ll stay happy with your purchase long after driving off the lot.
Title and Registration Fees
When you buy a new or used car, youre generally required to pay a registration fee to your states department of motor vehicles. The registration fee pays for license plates, registering the car and getting the vehicles title. It may be a flat fee or based on the vehicle type, depending on your state. Visit the website of your states department of motor vehicles for more information to help you estimate the registration fee for the car you plan to buy.
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 themâor avoid them altogether by declining add-on services such as rustproofing or paint protection.
How Much Should You Spend on a Car?
Its 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 Experians 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), youll need to factor in the cost of electricity (and installing a home charging station, if you dont 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: Youll 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.
How Much Car Can You Really Afford? (By Salary)
FAQ
How much money should I have saved to buy a car?
How much money do I need to have to buy a car?
The amount of money you’re able to put down on your car purchase helps you afford more car. Most experts recommend that you put at least 20% down on a car because new cars depreciate quickly. A 20% down payment will prevent you from going upside-down (owing more than your car is even worth) on your loan in a few years.
What should my salary be to afford a car?
We recommend you aim to spend about 10% of your take-home income on your monthly car payment. So, if you take home $3,000 each month after taxes, you might be comfortable having a vehicle with a monthly payment of around $300. However, your budget will fluctuate based on other expenses.
What is the minimum salary to qualify for a car?
Generally, you will need a monthly income of at least R6,000 – R10,000 to be considered for vehicle finance.
How much car can you afford?
To determine how much car you can afford, financial experts recommend keeping your total monthly car payment at 10% or less of your gross monthly income, spending no more than 15% to 20% of your take-home pay on car expenses, and ensuring that total vehicle costs, including loan payments and insurance, don’t exceed 20% of your monthly income.
How much should you pay for a car?
By figuring this piece out in advance, when it comes time to actually buy a car, you can make the best decision for your finances. Financial experts recommend that your monthly payment should be around 10% to 15% of your monthly take-home pay.
How much car insurance should you pay a month?
This part of the rule brings the cost of the car closer to home – what you pay monthly. It says the total car payment, including insurance, should not be more than 10 percent of your monthly gross income. For example, you should keep your interest, principal, and insurance payments below $500 if your monthly gross income is $5,000.
How much money should you put down on a car?
The amount of money you’re able to put down on your car purchase helps you afford more car. Most experts recommend that you put at least 20% down on a car because new cars depreciate quickly. A 20% down payment will prevent you from going upside-down (owing more than your car is even worth) on your loan in a few years.
How much should a car be worth?
According to Dave Ramsey, the value of all your vehicles should not be more than 50 percent of your annual income. His reason is simple: Cars are a depreciating asset and it make no sense, financially, to put too much money into buying an asset that could lose 50 percent of its value in five years.
How do I find out how much car I can afford?
Take a few minutes to run down what you spend every month. From your monthly take-home pay, deduct rent or mortgage, bills, groceries, child expenses, savings, and spending on entertainment. You will then discover how much car you can afford. Not sure what kind of vehicles can you buy with this monthly payment (or less)?