You can picture it. That dream car of yours that turns your head every time it glides past. Maybe it’s the elevated design, practical elements or upgraded power that’s caught your attention. But dreaming of a new car and affording one are two very different things. Getting the finances right now will make your future purchase feel like a well-earned milestone, not a financial strain.
Determine Your Target Price and Timeline
Before you can begin to save, you need to know what you’re saving for. Start by researching the make and model you’re interested in, then look at prices from different sellers. Don’t stop at the sticker price, remember to factor in extras like vehicle tax and insurance premiums.
Once you’ve worked out the total cost, break it down across a realistic timeframe, 12 to 18 months often works well. For example, if the car you want totals £18,000 and you plan to buy in 15 months, that’s £1,200 per month.
Create a Dedicated “Car Fund” Account
Keeping your car savings separate from your daily spending helps avoid temptation and confusion. You can open a specific savings account or use one of the banking apps with savings pots to create a virtual envelope for your car fund.
Set up an automatic transfer to this account the day after each payday. That way, the money’s already saved before you even have the chance to spend it elsewhere. Whether it’s £200 or £500 a month, treat this transfer as a non-negotiable part of your budget.
Cut Discretionary Spending
Saving doesn’t always mean overhauling your entire lifestyle, instead, you can start with small, intentional changes. Look at your bank statements and note what you’re spending on subscriptions, takeaway meals, or impulse purchases. Cancelling a rarely-used streaming service or choosing to cook instead of ordering food in twice a week can release more money for your car fund.
The key is mindset. If you frame saving as something positive, working towards a car that makes your commute smoother or your weekends more adventurous, it becomes easier to stick with.
Plan for Financing and Down Payment
Not everyone pays for a car in full upfront. You’ll need to decide whether to pay in cash or if you need to apply for some finance towards this car investment too. If you choose financing, aim to save the majority of the car’s value as a down payment. This lowers the amount you borrow, reducing your monthly repayments and total interest over time, while keeping you living within your means and lifestyle you can afford.
If your credit score isn’t ideal, don’t worry, bad credit car finance options are available, even if they can come with higher interest rates. In that case, a larger down payment becomes even more important to offset future costs.
Factor in Ongoing Costs Before Final Purchase
Buying the car is just the start. You’ll also need to budget for ongoing expenses like insurance, fuel, MOTs, future repairs or new tyres and servicing. If you’re taking out a loan, add monthly repayments to that list.
Calculate these recurring costs early to check whether your dream car is truly affordable. If the figures feel tight, you might need to save a little longer or consider a more modest model. Better to wait a few months than stretch yourself too thin and risk struggling to keep up with payments later on.