How Much Should I Save for My First Car?

Date: Oct 21, 2026

A common guideline is to save about 20% of the price for a new car or about 10% for a used one, if your budget allows. Start with what is realistic for your income-level, since a smaller down payment can still work.

Down Payment Guidelines

The 20/4/10 rule suggests 20% down, a loan of four years or less, and total car costs under 10% of gross monthly income. Those costs include insurance, fuel, and maintenance as well as the payment. However, the rule is a guideline, not a requirement.

Pick a down payment goal, add the extra costs, and work out a monthly amount.

Costs Beyond the Price

Plan for insurance, registration, repairs, and fuel. A small car sinking fund can help with maintenance.

Keep in mind that a car is not the right choice for everyone. If transit or sharing works for you, you may not need to buy yet.

A Simple Example

For a $10,000 used car, 10% down is $1,000. At $100 a month, you would save that in 10 months. Add a few hundred dollars for registration and repairs.

If saving a full down payment is not possible, a smaller amount may still lower what you borrow. The less you borrow, the less you’ll pay in interest.