Buying a car with cash helps you avoid debt, interest, and years of monthly payments. Save for the best dependable vehicle you can afford, then upgrade over time as your financial situation improves.
Before You Begin
- Review your budget to decide how much you can save each month.
- Set a realistic target amount for your next vehicle.
Steps
- Create a dedicated Vehicle Fund in EveryDollar to use to track savings for your next car.
- Add a planned monthly contribution to your Vehicle Fund in your budget.
- Deposit your planned amount into a dedicated savings account with your bank each month.
- Continue saving until you can purchase a dependable used vehicle with cash.
- Buy a vehicle you can afford, then continue saving toward future upgrades.
- Avoid financing or leasing your next vehicle.
Additional Information
A helpful guideline is to keep the total value of all vehicles you own at or below 50% of your annual household income. For example, if your household income is $82,000 per year, the combined value of your vehicles should be $41,000 or less.
Paying cash for a vehicle eliminates monthly payments and interest, leaving more room in your budget for other goals such as an emergency fund, debt payoff, investing, or retirement.
Consider saving the amount you would normally spend on a car payment, often $400–$800 per month. Start with the amount that works for your budget.
Next Steps
Consider creating Funds in EveryDollar for other expenses or non-monthly bills, so you can save for them each month. For more on Funds: How to Use Funds