How to Save for a Car Down Payment

Lack of cash for a down payment will not necessarily prevent an auto loan approval. However, a down payment on your next car purchase can help avoid an upside down loan situation (eventually owing more than the car's worth) and will lower your monthly payment. Edmunds.com recommends a 20 percent down payment. This is the equivalent of $4,000 on a $20,000 vehicle. Saving this amount can seem overwhelming. But with careful planning and sacrifice, you can acquire enough for a down payment on your next car.

Instructions

1

Research cars and pick a vehicle within your price range. Narrow your search, then visit dealerships to test drive cars. Decide on the maximum that you're willing to spend on a car, and plan to save 20 percent of this price. Use an online auto loan calculator to help you determine what you can afford (see the Resource section).

2

Review your monthly disposable income to see how much you can save. Once you have a down payment figure in mind, look at your budget to assess where your money goes. Calculate how much you have in disposable cash after paying essentials such as housing, utilities, transportation and food.

3

Save for a down payment faster by eliminating frivolous spending. Bring your own lunch to work instead of eating out with coworkers. Frequent thrift stores or discount stores to avoid paying full price for items. Get rid of your lawn care service and mow your own grass. Skip the salon and wash/style your own hair. Speed your efforts by selling personal items (unused appliances, electronics or furniture) or asking your boss about working longer hours to increase your income.

4

Deposit disposable income into a separate account each month. If you're aiming to save $4,000 for a down payment, and you have $500 in disposable income each month, it will take approximately eight months to reach your goal.