How to Save for a Car as a Teenager: A Step-by-Step Guide

It’s easy to want a car. A car represents freedom, mobility, and independence. Figuring out how to save for a car as a teenager is a lot harder. Cars are expensive, and saving up enough money to buy one is a major challenge.

Let’s look at some realistic strategies to help teens save for a car. With determination, smart budgeting, and a little help, your dream of owning your own wheels can become a reality.

Have an Honest Discussion With Your Parents

The first thing to do when wondering how to save for a car as a teenager is to sit down with your parents and have an open conversation about your goal of buying a car and how to budget for it. While this may seem scary, remember that your parents will probably want to help you succeed.

Approach the discussion with maturity. Come prepared with realistic estimates of the costs involved (we’ll help you with that below). Outline a reasonable savings plan and explain how having a car would positively affect your life, like getting to after-school activities or a part-time job on your own.

Throughout the conversation, demonstrate that you are willing to take on greater responsibility to enjoy the privilege.

It’s also important to set clear expectations during this conversation. Express your commitment to staying focused on your studies and maintaining good grades, saving a certain amount per month, or even assisting more around the house in exchange for their support.

Be prepared to compromise on things like how much your parents are willing to contribute financially or any restrictions they may want to set. Keep in mind that even though they’re your parents, they probably have valuable guidance to offer since they have experience with budgeting for expenses like auto insurance and maintenance.

With a spirit of cooperation, you’re more likely to come up with a solution that will benefit you in the long run. This conversation also lays the groundwork for strategies like saving for a car, helping to get a loan, or finding a used car.

Last, you should realize that your parents are concerned for your safety. That is a reasonable concern: accidents are the leading cause of death among American teens. You will need to convince them that you can handle a car safely and responsibly.

🚗 Learn more: Our latest post navigates the complex decision of whether or not parents should buy their child a car.

Do Your Research

Before setting a savings goal, especially when you’re learning how to save for a car as a teenager, it’s crucial to understand what you’re saving for. This means doing research to determine the true costs of car ownership.

1. Monthly Expenses

You have to budget for more than just the purchase price of the car. You’ll need to show your parents that you’re prepared for the monthly expenses that come with car ownership.

Car insurance costs will be high for a new teen driver, so you should plan for at least $400 per month. Factor in gas, which for a used compact car may be around $100 a month. Maintenance costs like oil changes and tire rotations will run $50 to $75 per appointment.

Many teens buy older cars because they are more affordable, but older cars have higher maintenance costs. Be aware of this tradeoff as you budget!

If you’re planning to borrow to buy a car, you’ll have to be prepared to make those monthly payments.

2. Used Car Prices

Next, explore prices for used cars in your area. Compact cars might not be as flashy as the latest muscle car, but they generally have lower sticker prices and get better gas mileage. Be realistic about what you want and what you need.

3. Ratings and Reviews

As you research models, explore their reliability ratings to get an idea of potential maintenance costs. If you have friends who own the models you’re considering, talk to them about what their monthly expenditures look like.

Remember that at this point in your life, you should prioritize a car that makes sense: a car that’s safe, gets decent gas mileage, and takes you where you want to go. Save the flashy status symbols for later in life when you have more financial stability and flexibility.

4. Create a Spreadsheet

Once you’ve researched costs, create a detailed spreadsheet outlining these anticipated expenses. This will give you a realistic target to start saving toward. Remember to account for sales tax, title transfers, and registration fees as well.

While it certainly takes diligence, evaluating all these factors will prepare you to reach your savings goal. It will also show your parents that you are serious and committed.

🚗 Learn more: Before you hit the dealership, understand ‘how much car can I afford‘ to make a financially sound decision.

Increase Your Income

The best way to save for a car as a teenager — or for anything, for that matter — is to increase your income. If you don’t already have a part-time job, start exploring options that fit into your school schedule.

1. Job Ideas While in School

Popular teen-friendly jobs include:

• Serving and other restaurant work
• Tutoring
• Pet sitting or dog walking
• Check-out, stocking, and bagging at the grocery store

Numerous job opportunities can fit around your school schedule. You can also try turning your talents into a business by offering freelance writing services, designing websites, or providing music lessons. Another idea is to ask parents, teachers, and neighbors if they need help with cleaning, yard work, or other small projects.

🧒 Learn more: Our post offers a comprehensive list of job opportunities suitable for 14 and 15-year-olds looking to enter the workforce.

2. Job Ideas While Out of School

During summer and school breaks, as you explore how to save for a car as a teenager, you can ramp up your savings by looking for full-time temporary work. Warehouse jobs and retail often hire seasonal workers. If you demonstrate responsibility, you could work out an arrangement with your supervisor to work part-time during school and full-time during breaks.

💻 Learn more: Our guide features more than 15+ online jobs for 16-year-olds eager to start their work journey.

3. Be Strategic With Shifts

Being strategic with the shifts you choose can help you maximize earnings. Nights and weekends tend to pay more than day shifts.

If you’re tracking your monthly income goals, picking up extra shifts when possible can help you meet or exceed them.

Start Saving Early

It’s never too early to learn how to save for a car as a teenager. Starting to put money away for your future car purchase, even as early as middle school, gives you a huge head start. This early financial planning is key to making your dream of owning a car a reality in your teenage years.

Even if you can only contribute $20 or $30 per month at first, consistency is key. Don’t underestimate the power that comes from a “money mindset” and creating a savings habit young.

Open a High-Yield Savings Account

As a teenager, once you start saving money for a car, it’s wise to open a high-yield savings account right away. This strategy not only separates your car savings from your everyday expenses but also enables you to earn interest, which is a smart step in learning how to save for a car as a teenager.

📚 Learn more: Discover our top 13 picks of finance books for young adults, perfect for building a solid foundation in financial literacy.

Time is on your side when you start early. The magic of compound interest can help you more than you think.

Look for teen savings accounts with higher interest rates, which are often available at online banks or credit unions.

Set up automatic transfers from your checking account to savings as soon as you get paid. This takes the mental labor out of the process and holds you accountable.

Start with a goal of transferring at least 10% of every paycheck. If you are living with your parents and they are covering your basic needs, you can save much more. Over time, increase the amount if possible. This is important: Never dip into your designated car savings for other purposes!

Ask your parents if they would be willing to match your monthly savings, either partially or dollar for dollar. This can turbocharge your savings, especially if you consistently exceed your contribution targets.

Remember that you’re never too young to save or invest.

📈 Learn more: Gain valuable insights on managing money wisely with our collection of financial tips for teenagers, shared by 15 experts.

Ask Grandparents or Other Relatives to Contribute

Approach this conversation in much the same way you did with your parents: armed with information, facts, and a plan.

Explain your savings goal and state that any contribution they could offer would mean so much to you. Get creative and ask them to give you money instead of birthday or holiday gifts, or ask if they’d be willing to join a matching program for milestones you reach.

Be sure to ask for their advice. Adults love to give it, and it’s often worth listening to. It also shows that you appreciate their knowledge and you’re not just after money.

If any of your relatives contribute, make sure you share your progress updates with them so they can enjoy being part of your journey.

Another option to explore is to ask whether anyone in your family has an old but functional car they may be willing to pass down or sell to you at a discount. This may give you access to affordable transportation faster.

Reduce Your Expenses

As unexciting as it may be, learning how to save for a car as a teenager requires you to reduce your expenses where possible. How much money are you spending on new clothes, eating out, and going out with friends every month? Identify areas where you can realistically cut back, even if it’s only temporary.

For example, packing lunch from leftovers at home rather than buying out every day can save you a few hundred every month.

To be successful at reducing your expenses, you have to evaluate your needs versus your wants.

Avoid Impulsive Purchases

Earning more is half of the savings equation. The other half is spending less.

Did you know that as a teen, your brain is hard-wired to be more impulsive? The prefrontal cortex, which is the part of your brain responsible for impulse control, is still developing during your teen years. This can make it harder for you to control your impulses and think through the consequences of your actions.

Peer pressure is also at an all-time high for teens. You may feel like you need to make impulsive decisions to gain approval from your friends or elevate your social status.

But all this impulsivity can sabotage financial goals like saving for a car. The urge for instant fun competes with long-term priorities.

Just because your brain is still developing doesn’t mean you’re powerless. Practice self-awareness and recognize when you’re tempted by impulses.

Maintain a visual reminder of your savings goal by putting a picture of your dream car on your phone or bedroom wall.

Avoid situations or friends who tend to encourage poor impulse control. Talk to your friends about your savings goal and encourage them to set their own savings goals so you can work together.

Set Incremental Milestones

Another important thing to take into consideration when planning how to save for a car as a teenager is to set incremental milestones. Staying motivated over months or years of saving can be challenging, even for adults whose brains are fully developed.

To help with this, break your total savings goal down into smaller milestones to maintain momentum.

Maybe you start with a goal of saving your first $500. Then, make your next milestone $1,000. Ask if your parents, grandparents, or other relatives could make contributions to your savings account every time you reach a milestone.

Seeing your savings grow incrementally can provide a sense of accomplishment and progress that helps you stay focused.

Consider an incentive reward system for yourself: After hitting a milestone, treat yourself to a fun activity or desired purchase. Just make sure the reward amount fits within your overall budget.

Scale Up Your Income

When learning how to save for a car as a teenager, you must understand that it takes discipline to control expenses, but focusing on continuously increasing your income will further accelerate your savings.

At your part-time job, demonstrate good work so you’re considered for raises and promotions. If other jobs in your area offer higher pay, what’s holding you back from applying?

As you gain skills and experience, aim for positions that pay more. Investing energy in advancing your career trajectory pays off doubly: You get higher wages while learning new skills for the future.

Consider an Auto Loan

Once you turn 18, financing a used car through a small auto loan may be an option worth considering. A loan could help you buy a more reliable used car while staying within your budget. If you have substantial savings, you can use that money to pay a good chunk of the car’s price as a down payment.

Research lenders and get pre-approved before shopping for a car. Credit unions typically have some of the best rates.

As a teen, loans can be difficult to secure because you don’t have a credit history built up. There are a few ways to approach this:

1. Before you turn 18, ask your parents if they’ll add you as an authorized user on their credit card. They don’t have to give you access to the card (in fact, they probably shouldn’t), but this can lay the foundation for good credit.
2. Ask your parents about getting a debit card that builds credit.
3. Ask a parent to cosign an auto loan to help you secure both approval and a lower interest rate.

Before committing to a loan, have an honest discussion about the risks of debt. Debt is not a quick fix; it can have major long-term ramifications. Shop for the shortest loan terms possible while keeping payments manageable. Only borrow what you can realistically afford to repay from your income.

Buy Used to Save Money

One of the best ways to save for a car as a teenager when purchasing your first vehicle is to buy a used car instead of a new one. While a brand-new car may sound exciting, a used car offers big savings.

With any given model, choosing one that’s a few years old with low mileage can reduce costs by a major amount. This is because the loss of value is steepest in the first one or two years for new cars.

Narrow down your options and consider having a mechanic inspect the car before purchasing. Look for newer tires, brakes, or batteries to avoid immediate expenses.

Celebrate Your Accomplishment

Figuring out how to save for a car as a teenager is a major accomplishment. Make sure to celebrate this financial milestone. Give yourself credit for the discipline required to buy a car.

Learning how to save for a car as a teenager is about more than just owning a car. To reach that goal, you will need to learn and master skills that will help you for the rest of your life!

Owning your own car is a tangible reminder to be proud of your money management skills. Let the satisfaction of this achievement motivate you toward future goals like college, an apartment, or starting your career. Enjoy the ride.