Car Replacement Fund Calculator
Set up a sinking fund for your next car — the monthly amount to save so you can pay cash instead of financing.
How it works
Grown savings = saved × (1 + r)^n · Needed = price − grown savings · Monthly = needed × r ÷ ((1 + r)^n − 1), r = APY ÷ 12, n = months
A sinking fund flips car ownership around: instead of borrowing and paying interest, you save toward the next car while driving the current one, then pay cash. Because you earn interest instead of paying it, the total out of pocket is lower, and you skip the risk of being upside-down on a loan. The monthly figure is set so contributions plus interest exactly hit the target on schedule.
Worked example
For a $30,000 car in 7 years (84 months) with nothing set aside yet and a 4% APY, you’d save about $312 a month. You contribute roughly $26,200 and the account’s interest makes up the rest.
Frequently asked questions
Why save for a car instead of financing?
Paying cash means you earn interest while saving instead of paying it while borrowing, and you avoid the risk of owing more than the car is worth. The trade-off is patience — you drive your current car longer while the fund builds.
Where should the fund sit?
A high-yield savings account or money-market fund keeps it liquid and low-risk. Because the timeline is often only a few years, most people avoid the stock market for this specific goal.
What about inflation on the car price?
Enter tomorrow’s expected price, not today’s, if you want to be precise. Bumping the target up a few percent covers the tendency of vehicle prices to rise over a multi-year window.
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Educational estimate, not financial advice. Returns are assumed constant and are not guaranteed.