It’s probably the second biggest purchase that you’ll ever make. It could feel out of reach, but may not be!

Quick Notes:

-Use online tools to calculate affordability and your downpayment

-Automate your savings

-Shop around for interest rate options

Today’s new car prices average around $33,000, not including costs of insurance, maintenance, fuel and, of course, road trips enjoying your new wheels. If you’re not sitting on $33,000 in cash to purchase that car, then you are likely looking at financing the purchase. Financing charges and interest will add thousands to your total purchase cost.

An investment that size warrants thinking about two questions: how to save money to make the purchase; and how to lower the costs of paying for your new car.

Saving to make the purchase

Unless $30,000 has fallen into your lap, purchasing is going to take some planning and accumulating of cash. How to do that? It’s an easy two-step: earn more; and spend less. Plans as simple as that are not always that simple to implement, though.

Here is a four-step plan to pulling together the money to purchase the car of your dreams.


Step One: Calculate how much you want to pay

Figure out what you can afford to spend on a car. Take into account what you’ll have to spend each month to gas it up, insure it, clean it and keep it in good repair.

Step Two: Calculating your downpayment

Your monthly payment will be higher or lower depending on how large a downpayment that you give the lender. Figure out how much you need to put down to qualify for a loan and monthly payment that you can afford.

You can find tools online to help you calculate what you need. Check out the loan calculator on or try the affordability tool at Bank of America.

Step Three: Decide

Did spending time on your budget, calculating operating costs or determining your downpayment or monthly payment force you to change your mind? Take a moment to reconsider whether the timing is right to make this big purchase.

Step Four: Save

If you’re leaping, it needs to get real every time you reach into your wallet (or are tempted to). Saving funds can be an accidental or by-chance exercise or a planned one. The best chance for success comes from planning for automatic savings.

Making savings automatic will help you avoid the temptation to spend the money required for your car purchase on other things.

You won’t have to decide to save over and over again, but just once. There several ways to do this. Here are two, but ask your bank about other products they might have:

First, is your payroll deposited directly? If so, your pay usually goes straight into a checking account. It doesn’t have to! Ask your human resources department to direct a portion of every paycheck into a savings account instead.

Second, ask your bank to take a certain amount out of your checking account on fixed dates every month and put it straight into your savings account. You can set this up online too.

Make the decision to save regularly once, then reap the rewards week after week or month after month.

Making financing more affordable

Financing a car purchase will add thousands of dollars to your total purchase price, and likely hundreds of dollars to your monthly personal expenses. Here are four steps to saving money on your financing.

Step One: Check your credit

Your interest rate reflects an assessment of how risky a borrower you are. That risk is measured in part by your credit score. Your credit score is based on information collected about your use and abuse of credit. If that information is wrong, a poor score will affect your financing costs. There are places where you can check your credit score for free, including FreeScoreOnline. If you find false information, you can contact the credit rating bureau to have it corrected.


Step Two: Shop around

When you are looking for financing, remember that you are a customer. Talk to more than one potential financier, and don’t limit yourself to talking just to the dealer who is selling you the car.

One thing to keep in mind when shopping around for interest rates: compare apples with apples! There will be a lot of numbers and options floating around. When making comparisons, be sure to be looking at consistent loan amounts, down payments and loan lengths.

Step Three: Get pre-approved

Once you find a financing option that seems attractive and affordable, ask for formal pre-approval. Take it to the dealership where you’re going to buy your car. Challenge them to match the terms of the pre-approval that you show them.

Step Four: Read carefully

It will be long, confusing and mind-numbingly boring. But those financing documents are important and will tie up your funds for years. Read what you’re signing carefully and ask any questions that you have. Double-check the numbers. If they do not seem to add up, ask for confirmation or clarification.

A deeper dive — Related reading from the 101:

Fast and Simple Ways to Manage Your Money | Living 101

Buying a car is a big expense you’ll be paying for a long time. This article is full of tips that will help to make it financially more manageable.

The average American credit score is shocking (In a good way) | Finance 101

The availability of and affordability of financing depends a great deal on your credit score. Read this for more context about what credit scores mean to Americans.