New Car Sinking Fund Calculator
Work out the monthly deposit that grows into your car target by the purchase date, including interest earned on the balance you build.
How it works
Monthly = (target − current×(1+r)ⁿ) ÷ [((1+r)ⁿ − 1) ÷ r], r = APR ÷ 12
A sinking fund reverses a loan: instead of borrowing and paying interest, you save ahead and earn it. The monthly deposit is the future-value annuity payment that, together with interest on the growing balance, reaches your target by the purchase date. Paying cash from a fund like this avoids the finance charges a car loan adds, so the interest you earn works in your favor twice — once as growth and once as loan interest you never pay.
Worked example
To reach $30,000 in 36 months with $4,000 already saved at 4%, the $4,000 grows to about $4,509, leaving $25,491 to fund. That needs roughly $667 a month; your deposits total about $24,000 and interest covers the remaining $2,000.
Frequently asked questions
What is a sinking fund for a car?
It is money you set aside regularly toward a planned purchase so you can pay cash instead of financing. Unlike a loan, it earns interest for you rather than costing it.
Is saving up better than a car loan?
Paying cash avoids loan interest and gives you a stronger negotiating position, though it means waiting. If a loan’s rate is below what your savings earn and you need the car now, financing can still make sense — compare the numbers.
Where should I keep a car sinking fund?
A high-yield savings account or money-market account keeps the money safe and liquid while earning interest. Avoid volatile investments for a goal only a few years away.
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Educational estimate, not financial advice.