Triple world champion Vettel, who leads this year's standings by 21 points from Ferrari's Fernando Alonso, was also fastest in second practice on Friday when overcast skies hung over the Nuerburgring.
Vettel has never won in front of his own fans but warmed up for qualifying with a top time of 1:29.517, with his team mate Mark Webber third.
The Grand Prix Drivers' Association announced on Thursday that they would withdraw from Sunday's race if the multiple tyre blow-outs seen at last weekend's British Grand Prix occur again. All three practice sessions have been free of incident.
After the intervention of the governing FIA, Pirelli has brought upgraded rear tyres to Germany with an inner belt made of the synthetic fibre Kevlar rather than steel.
Practice appeared to prove that the cooler tyres would aid Red Bull and Mercedes, with last weekend's Silverstone winner Nico Rosberg second fastest for his German team, just like Friday's two runs.
Team mate Lewis Hamilton, quickest in first practice but eighth second time around, was only seventh on the timesheets on Saturday and looked to be having difficulties with the car.
"I have huge oversteer everywhere," the Briton said over the radio.
The Ferraris of Alonso and Felipe Massa only went out for the second half of the session but were fourth and fifth quickest while Williams' Pastor Maldonado took part in practice after a smoking KERS in the garage had to be extinguished.
The Venezuelan drove competitive times but later told the team radio: "It's really bad. I cannot drive the car."
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