In SQL Server, I have decimal data to be stored in a table (which is never used for joins or filtering). This decimal data is variable - 80% of the time it has single digit values (1, 4, 5) and remaining 20% are with 16 digit decimals (0.8999999761581421, 3.0999999046325684).
I am wondering If I can save any storage space going with varchar instead of float, or if I should stick with float since this is numeric data?
Always use the most appropriate datatype! Since this is clearly numerical data - use a numerical type. This will allow to e.g. sum the values, order by those values - those are numbers - so treat and store them as such!!
If you need to support fractions, you could use FLOAT or REAL, but those are notorious for rounding errors etc. Using DECIMAL(p,s) avoids those pitfalls - it's stable, it's precise, not prone to rounding errors. So that would be my logical choice.
See the official MS docs for DECIMAL for your details on how to define the p (precision - total number of digits overall) and s (scale - number of digits after the decimal point).
And btw: those are stored in fewer bytes that a varchar column large enough to hold these values would be!