If you’re a new driver, you may find yourself asking ‘but can I afford to buy a car?’ After a house, a car is one of the most expensive purchases you’ll make in your lifetime. As such, it’s sensible to start saving for a car as soon as possible.

In this post, we’ll cut out the jargon and explain how to start saving for a car.

Why should you start saving for a car?

With all the car finance that’s available, you may find yourself wondering why it’s even worth saving for a car.

With car finance, you borrow a pre-determined amount of money against the purchase of a vehicle. You then pay this money back via a series of monthly instalments – plus interest.

As such, if you can start saving for a car deposit (sometimes called a down payment), you’ll be reducing the sum of your monthly car finance repayments. You’ll also be saving on the total car finance that you owe, because you won’t have as much interest to pay.

For example, if you borrow £7,000 for your car finance, you may face monthly repayments of £265. The overall amount that you might pay for your car finance could therefore reach £9,500. However, by putting down an initial deposit of £2,000, your monthly repayments would drop to £190. You’d be paying back £8,800, saving you £700 overall.

The higher your interest rate, the higher the amount you’ll save if you put down a deposit. Aiming to save between 10 and 20% of the overall amount is a good figure to go for.

How to start saving for a car

Your unique circumstances will determine what car finance is right for you. The size of deposit you can aim for will also be unique to you, and will vary according to the kind of car you’re saving up for.

Although it’s beneficial to have a higher deposit saved up, you should also be realistic. Break down your monthly budget, factoring in all expenditure, and establish a realistic figure for the amount that you can expect to save each month.

Also, remember that once you’ve secured car finance and a new vehicle, there will be other vehicle expenditures, such as maintenance and insurance fees.

Once you’ve established a realistic figure to save towards a car, you can decide where to store that money.

If you already have a savings account, you could set up a regular direct debit or standing order. This will automatically transfer a set amount each month, so that you don’t have to think about it. If you don’t have a savings account, take the time to compare different options.

If you already have a car, remember that you can trade it in or sell it. That can help to offset the cost of your next vehicle. Just remember to compare offers from different dealers or private buyers before settling on your final choice.

Find car finance today

Now that you’ve learned why and how to start saving for a car, you can start to think about your car finance. Contact My Car Credit on enquiries@mycarcredit.co.uk to learn more.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
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£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!