How much money you'd need to save per paycheck to buy a new car

Cars are as expensive as they've ever been, and it takes time to save. Here's how much you need to save each paycheck to buy a new car.


Drivers keep their cars for roughly seven years, on average. When it's time for a new vehicle, many households need to plan and save to manage that cost.

On average, a new car costs $38,940 as of May 2020, according to data from Kelley Blue Book. That's an increase of more than 4% from May 2019, too, despite the economic issues brought on by the coronavirus pandemic that have affected the auto industry.

Coming up with the money for a new car with a sticker price of nearly $40,000 can seem out of reach. Like almost any other financial goal, experts say that it's easier if you plan ahead and regularly save money toward that goal.

"Tackle it in bite-sized chunks," says Jedidiah Collins, a certified financial planner and author of the book "Your Money Vehicle." An easy way to do that is to figure out how much you'd need to save out of each paycheck to put towards the purchase.

How much you need to save per paycheck to buy a new car

There are a couple of ways to establish a goal when it comes to saving for a new car: You can try and save up enough money to pay for the full sticker price, or you can aim to pull together a down payment and finance the remainder. Although the rule of thumb for a down payment on a car is typically 20% of the asking price, the average down payment for both new and used vehicles in 2019 was 11.7%, according to an analysis by Edmunds.

Since there is a wide range of potential price points and every driver has different tastes and preferences, it's perhaps best to use some averages to calculate a per-paycheck savings goal.

Let's assume that the goal is a vehicle that costs the industry average of $38,940 and that the driver earns $62,000 per year before taxes, which is the median for American households according to the Census Bureau's latest figures.

If you receive 26 paychecks per year and hope to hit your savings goal in two years, here's what you would need to save per paycheck in order to buy a new car:

  • For the average ~12% down payment ($4,556) after 2 years: $88
  • For a 20% down payment ($7,788) after 2 years: $150
  • For the full price of a new car ($38,940) after 2 years: $749

Saving just for a down payment, and financing the rest of the purchase price of a new vehicle, requires the least per paycheck. And the good thing about financing, especially in the current economic climate, is that many auto manufacturers and dealers are extending consumer-friendly financing terms, including zero-percent loans and cash-back bonuses.

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It's also important to think about how carrying auto loan debt for a few years beyond your purchase could affect your budget and your ability to reach other financial goals.

Breaking the goal down into 'bite-sized chunks'

Because buying a car is a short-term goal, experts say a standard savings account is the best, and safest, place for the cash you're putting aside. Be sure to shop around for a bank or credit union that offers a high interest rate.

"I would recommend an online bank with a high-yield savings account. Even with rates dropping you can get more" than you would at a large, commercial bank, says Amy Shepard, a financial advisor at Arizona's Sensible Money. "That's the best option, hands down."

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Shepard says there two other easy things you can do to improve your odds of reaching your savings goal: "Automate your savings so you don't need to think about it, and use a separate savings account just for that purchase."  

Automatic transfers will help take the choice, and some of the pain, out of saving, while using a different savings account — apart from your emergency savings, for example — may help stop you from withdrawing the money for other purposes. It'll keep your money "out of sight and out of mind," Shepard says, which "helps you mentally commit" to reaching your goal.

Be patient, stick to your strategy, and before you know it, you should be able to reach your goal and buy the new car you want.

After all, there isn't a better feeling in the world, Collins says, than being able to look back at what you've accomplished and "being able to pat yourself on the back and congratulate yourself for hitting your goal."

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