Best Account to Save for a Car: Top Options to Consider

Saving for a car requires choosing the right account to grow your money efficiently while keeping it accessible. The best option depends on how soon you plan to buy, your risk tolerance, and whether you want to earn interest along the way.

There are several types of accounts to consider, each with its own benefits and drawbacks. Understanding these options can help you maximize savings while ensuring your funds are available when it’s time to make a purchase.

Traditional Savings Accounts

A traditional savings account is a secure way to set aside money for a car. Offered by banks and credit unions, these accounts provide a safe place to store funds while earning a small amount of interest. They are federally insured—up to $250,000 per depositor through the FDIC for banks and the NCUA for credit unions—protecting your money even if the institution fails.

One key advantage is accessibility. You can withdraw funds at any time without penalties, making it easy to use the money when you’re ready to buy. Many banks allow automatic transfers from a checking account, helping you save consistently. Some also offer goal-setting tools within their mobile apps to track progress.

Interest rates on traditional savings accounts are low, typically between 0.01% and 0.10% APY at major banks. While this won’t significantly grow your savings, it provides a stable place to store money. Online banks sometimes offer slightly higher rates, but they are still lower than other savings options.

High-Yield Savings Accounts

High-yield savings accounts offer better interest rates than traditional savings accounts, making them a strong option for growing your car fund. These accounts, primarily offered by online banks and credit unions, can provide APYs above 4.00%, allowing savings to grow faster without investment risk.

Since online banks don’t have the overhead costs of physical branches, they often charge fewer fees and offer higher returns. Many also provide mobile apps with automation tools to simplify saving.

While these accounts keep money accessible, some have limits on external transfers or require a few business days to move funds to a linked checking account. This delay may not be ideal for last-minute purchases, but for planned expenses like a car, it’s usually manageable. Reviewing withdrawal policies before opening an account can help avoid surprises.

Money Market Accounts

Money market accounts (MMAs) combine higher interest rates with flexible access to funds. They often feature tiered interest rates, meaning larger balances earn better returns. Compared to traditional savings accounts, MMAs usually offer better yields but may require a higher minimum balance to unlock the best rates.

A key benefit is the ability to write checks or use a debit card for withdrawals, making it easier to pay for a car directly from the account. While banks previously limited certain withdrawals to six per month, many have relaxed these restrictions, though some still charge fees for excessive transactions.

Some financial institutions link MMAs to brokerage accounts, allowing users to keep cash reserves separate from investments while maintaining easy access. Certain banks also offer rate boosts for customers with multiple accounts. However, some MMAs have monthly maintenance fees, which can reduce earnings unless waived by meeting balance requirements.

Certificates of Deposit

Certificates of deposit (CDs) offer a way to grow savings with a fixed interest rate over a set period. Unlike other accounts that allow frequent deposits or withdrawals, CDs require an upfront lump sum investment that remains untouched until maturity. In return, they typically offer higher interest rates than regular savings accounts.

Choosing the right term length is important, as withdrawing funds early usually results in penalties. These penalties can range from a few months’ worth of interest to a percentage of the principal. If you plan to buy a car within a specific timeframe, aligning a CD’s maturity date with your expected purchase ensures access to funds without penalties.

Short-term CDs, typically six to twelve months, can be useful for those who want better returns than a savings account while keeping money relatively accessible. Some banks offer no-penalty CDs, which allow early withdrawals without fees, though they tend to have lower interest rates.

Laddering CDs—spreading deposits across multiple CDs with different maturity dates—can provide a mix of higher yields and periodic access to funds. This strategy allows savers to benefit from rising interest rates while ensuring portions of their money become available at regular intervals.

Brokerage-Linked Savings Accounts

For those open to integrating savings with investment opportunities, brokerage-linked savings accounts offer a flexible alternative. These accounts, offered by major investment firms, allow users to hold cash in a savings-like account while keeping access to brokerage services. Depending on the provider, funds may be placed in a high-yield cash management account or a money market fund, often earning better returns than traditional savings options.

A major advantage is the ability to transfer funds into investments such as stocks, bonds, or exchange-traded funds (ETFs) if a saver decides to pursue higher returns. Some brokerage firms offer FDIC-insured sweep accounts, where uninvested cash is automatically moved into partner banks to earn interest while maintaining protection. Unlike CDs or money market accounts, these accounts typically have no withdrawal restrictions, making them a flexible option for those who want to keep their money accessible while potentially earning more.