Maximizing Savings on Car Financing

Having a cash reserve allows you to enjoy greater security and explore more options. The more you can save, the better your position when shopping.

Imagine the following situation: you have a considerable amount in your savings account. That means having the freedom to make choices other than relying solely on your paycheck – like buying a better, bigger, newer car. For some, that means being able to buy a car without going into debt.

Why save before getting finance for a car?

Most financial institutions will require a down payment from the customer when financing a car. Typically, this amount varies between 10% and 20% of the purchase price of the vehicle. But even if it’s not mandatory, there are at least three great reasons to save before taking out a car loan:

A larger down payment reduces the amount you have to borrow, making your payments more affordable or shortening your payment period. This helps reduce the amount of interest you’ll pay over the term of the loan. You will have more funds available to tackle other goals, such as buying a house or carrying out a renovation.

If you are planning to buy a vehicle, Carplus will be happy to help you! Our team of auto finance specialists works with a wide network of lenders so you can find the vehicle of your choice at a reasonable price with a comfortable monthly payment. Just fill out the form for more information.

How much should I save to buy a car?

The average price of a car in the UK ranges from £12,000 to £36,000.

  • Compact cars have an average price of between £12,000 and £17,000.
  • Medium cars: £22,000 – £36,000.
  • SUVs: £23,000 – £28,000.

Therefore, depending on the price of the car, the savings goal will vary. Naturally, the higher the total price, the higher the down payment amount. Let’s calculate the minimum values to save using some examples:

  • Hyundai i10 (£13,430): A 20% down payment would be £686.
  • Volkswagen Polo (£18,855): You’ll need at least £3,771.
  • Nissan Qashqai (£25,505): Minimum savings would be £5,101.

Setting a savings goal above the minimum is always a good idea. However, make sure your goal is achievable so that you can comfortably accomplish it.

How long does it take to save for a car?
When you know how much money you need to save to buy a car, you’re already halfway to knowing how long it will take. You also need to factor in your monthly income, fixed expenses, and the volatility of car prices.

Flexible choice when buying a car

It is essential to select car loans that are best suited to your current lifestyle and needs. You have the opportunity not only to decide on the payment schedule and plan, but also to choose the terms of the agreement and what will happen at the end of the financing agreement.

Let’s compare the two most common financing options


The Personal Contract Purchase (PCP) is a long-term rental agreement, in which, at the end, the borrower has three options:

Return the car to the dealer. Pay the final installment, called “balloon”, which is equal to the car’s resale value, and keep the vehicle. Use the final payment to purchase a new car.

PCP contracts are typically 3-5 years in duration, require an initial deposit and, as evidenced by the options above, offer a great deal of flexibility. Although the monthly car payments are generally lower, if you want to terminate the agreement early, you will need to pay a settlement amount.


The Hire Purchase (HP) involves paying a down payment (10%) and paying the vehicle’s value in monthly installments. Unlike PCP, you are borrowing the full value of the car, which means the repayments are usually higher. However, once you make the last monthly payment, the car is yours.

Contracts last from 1 to 5 years. It is possible to settle the financial agreement in advance, without penalties. You are not bound by a pre-agreed annual mileage forecast. There is no lump sum payment at the end.