8 Ways To Save Cash for a Car on a Tight Budget

I’ve long had a dream to pay cash for a new car but I didn’t really believe that we could do it. I sincerely wanted us too, but just didn’t know how it would happen. But we recently did it. For the first time ever, my husband and I paid cash for a car! I am excited to share more of how we did it – and some truly effective ways to save cash for a car, so you can do it too!

Here’s our car story. I’m a stay at home mom married to a Lutheran school teacher. We have 3 kids. When we became pregnant with our third, we bought new car seats so I could fit all 3 kids in the back of my Mercury Sable. It was much cheaper to buy narrow car seats than it was to replace a vehicle – especially because we could still fit.  The Sable was the first car I owned (used) that I bought right before college graduation in 2004. It had served me well for many years and been paid off for a long time. I didn’t want another car payment but I was starting to dream about how much easier life would be with a mini van. So we started saving.

We had built up our new car fund account quite a bit, and were almost ready to start looking when my Dad called one night with a lead on a used mini van. It was well maintained with lots of upgrades – and at only half the price of what we were planning on. The only glitch? It was in Texas and we live in Indiana. My dad checked it out and gave his approval, so sight unseen, we wired him the money to buy the van for us. A month later, he drove it up to Indiana where he was helping replace the roof at my sister’s house. Yay for amazing Dads who love their daughters well, even from a distance.

This post may contain affiliate links. As an Amazon Associate, I earn from qualifying purchases. You can read more in my disclosure policy.

That was 6 months ago now, and while our van does have some quirks (it is a used vehicle after all), I am very pleased with our purchase. We bought the the mini van for $4,500 and put in about a $1000 worth of work – replacing hoses, fixing door handles, and replacing tire pressure monitoring systems. We just sold the Sable for $1800. So basically, for a difference of $3700, we upgraded from my 2003 Mercury Sable with 161,000 miles to our 2008 Town and Country mini van with 111,000 miles. (The money we received from the sale of the Sable went right back into our new car fund for our next vehicle purchase.)

I am still in disbelief that we were able to pay cash for a new (to us) mini van! I don’t share any of this to brag but rather to give you encouragement. If we can save cash for a used vehicle on our tight budget, you can do it too! It really is possible even though it may seem like a distant dream.

How did we save up enough cash to pay for a new used vehicle? We did it in a variety of ways, but here are 8 ways to save cash for a car. They worked for us, and I hope they will help you save cash for a car too!

1. Set up a separate car fund.

This is one of the most important ways to save cash for a car – and truly the most effective. We currently have 15 different savings accounts – and the new car fund is only one of those. By having a separate new car fund, it helps ensure money won’t be spent on other projects.

We all know how easy it is to borrow from one savings account to another. Having separate accounts keeps you focused on your saving goals. When we add to the new car fund, the money stays there. We have a separate savings account for car repairs so even that doesn’t touch our savings. You can read more about all our accounts, where we keep them and why in my blog post here. 

2. Set up automatic transfers from each paycheck.

It doesn’t matter how larger or small the amount is. The important thing is to set up the automatic transfer and put your savings on autopilot. $25 every paycheck adds up $600 a year. $100 a month ends up saving you $1200 over year. Of course, the more you save, the quicker you reach your goal. However, saving something is always better than saving nothing. Start with an amount that you are comfortable with and see if you can increase it next month.

3. Start saving today!

Don’t wait any longer to start saving for a new car! The more time you have to build your savings, the easier it will be. Even though we just upgraded my vehicle, we are now focused on saving to replace the next one. My husband’s Tahoe is at 271,000 miles. It is still in excellent condition and we plan on driving it for at least another year or two, but we know the end is in sight. For that reason, we have made it our goal to save as much as we absolutely can in the new car fund this year. Even if you have just purchased a vehicle, start saving for your next one. It’s better to save a little bit at a time instead of getting hit with a large car payment.

(Note: We were able to pay cash for a new to us used Suburban after buying the van! All by following these same steps.)

4. Use part of your tax refund to build the car fund.

If you get a tax refund (as we often do), use a portion of your refund for your car fund. It is nice to see a large increase in your total at once. Adding $500 or $1000 at tax time is a good motivation to keep working at saving more. Put your tax refund to good use as soon as you get the money back.

5. Get a part time job.

3 years ago, I started working from home for our Lutheran church district office providing website help and technical support. When we started, my husband and I decided that all this money would go straight to our new car fund. It isn’t much but it adds up. I probably average 10 hours a month in working for the district. At the end of each month, I transfer my entire paycheck directly to our new car fund. Slowly but surely, this part time job added several thousand dollars to our car fund. If you get a seasonal job or a temporary part time job, you can build your savings much faster. If you get paid overtime, considering adding all your overtime pay to the new car fund. The same is true of bonuses. Since this money isn’t part of your budget, it is easier to put it towards big saving goals. Part time jobs aren’t always fun but when you are determined to pay cash for a new vehicle, you can be thankful for the extra work.

6. Save money wherever possible.

There are so many ways to save money! I love looking for more ways to save our family money. Everyone can save money in countless ways. Whether you are a natural saver or not, here are some ideas to start you thinking about ways you can save money.

Whenever you save money in one area of your budget, move it over to the new car fund. You can view all my saving money tips and tricks here. I am sure you can find one or two new ideas!

7. Set your priorities but be willing to make concessions. 

When it came time to shop for a new vehicle, we only looked at used vehicles. This cuts costs dramatically. We were also willing to look outside of our local area to find a good deal. Interestingly enough, all 4 of the vehicles we have owned were bought in Texas (even though we live in Indiana). Andy bought a one way ticket to Texas last time to buy a Tahoe that was $5000 cheaper than anything we could buy around us. We definitely came out ahead in the deal.

Even if you don’t want to travel far, be willing to make concessions. What is absolutely necessary and what is your bare minimum? Knowing those things help. Buying a car with over 100,000 miles doesn’t bother us. We just wanted it to be well maintained, and it was. My one electric sliding door on the van has some electrical error and doesn’t always want to close. I just watch to make sure it closes. Was that worth paying half price of our savings? Yes, yes, it was!

8. Be patient. 

It takes time. Very few of us can pay for a new vehicle next month. Even paying cash for a new vehicle next year might be a stretch. But if you plan to pay cash for a new vehicle in 2-5 years, you can do it! Start now and start building your savings so you can pay cash for your next car. 

Our story is proof. Every day I get in our mini van, I am thankful that we don’t have a car payment. Now, we’re working hard to apply these same tips and rebuild the car fund for our next vehicle purchase.

Have you ever paid cash for a vehicle, or are you saving for one now? What tips would you add to this list?

Similar Posts


  1. We brought two vehicles for cash last August. A 2005 Jeep with close to 80,000 miles & and 2007 Dodge Dakota 4×4 with less than 33.000!!! $4000 for both. We were in the right place at the right time & have been looking for some time. Nicely maintained and very minimal repairs on them the last year. We haven’t had car payments in years & love the position we are in these days!

    1. That is absolutely amazing! Yes, indeed…sometimes being in the right place at the right time is very helpful! But saving for those days is pivotal. I am so happy you managed to avoid more car payments, which definitely helps your financial position!

  2. I’ve been saving my preschool check for 3 years to replace my 2006 Chrysler Town and Country with cash. Turns out it was actually a wedding fund.😀

Leave a Reply

Your email address will not be published. Required fields are marked *