The Fastest Way to Save for a Car

The fastest way to save up for a new car is to first reduce the amount you'll have to save. Putting 20 percent down on a new car has been the golden rule for years, but you can scale down the amount necessary for the down payment on a car in just a few ways. 

Can You Put Zero Down?

You’ve probably heard countless times on radio and TV commercials that promise: “Zero down!” Yes, these loans are out there, but they generally require a very good credit score — 700 or above — and your monthly payments will be higher because you’re financing more of the purchase price. Monthly payments will be about $20 less for every $1,000 you put down upfront. Your interest rate could also be higher unless you also qualify for a zero-rate annual percentage rate, or APR. 

Look Into Rebates

Don’t give up if you can’t manage a zero-percent-down deal. Mike Rabkin, owner of From Car to Finish, a national new-car negotiating service based in Rockville, Maryland, suggests looking into possible rebates. “It’s up to you to ask the dealer what all the qualifying rebates are at the time,” Rabkin says. “They may not offer this information.”

Some rebates come from the manufacturer, not the dealer, and they lower the price of the vehicle. This means the percentage you’ll have to put down will be less — 10 percent of $20,000 is $500 less than 10 percent of $25,000. Special rebates are out there for military members, senior citizens and first-time buyers, to name a few.

Do You Have a Trade-In?

If your current car has any trade-in value, this can act as your down payment with no cash required. Rabkin says you can get an actual offer for your trade-in ahead of time on Autotrader.com. Plug in the required information about your car and you’ll get offers from local dealers. “Their offers can be adjusted when they see your vehicle if it’s not as described,” Rabkin warns. You can remain anonymous until you decide to take one of the dealers up on its offer.

Consider Gap Insurance

If you end up putting zero down — or near zero down — on your new car, consider purchasing guaranteed auto protection or gap insurance. If your car is stolen or totaled within a set period of time after purchase, usually no more than two years, this insurance pays the difference between what you owe on your car loan and its value. 

This is an important distinction from regular auto insurance, which only pays the actual value of your vehicle at the time of the incident. New cars can depreciate up to 35 percent in the first two years, and that lower value is what insurance companies normally pay out. If you finance most or all of the purchase price, there’s a good chance the amount of your loan will exceed the car’s value and you’ll be responsible for paying the balance. 

Decide when you want to buy a new car and divide the amount of the anticipated down payment by the number of months you have until that time. This will tell you how long it should take to save enough money. Then visit dealerships and ask about those rebates.