Working out how much you can afford to pay when purchasing a car can be tricky work as there are so many things to consider. Can you afford to buy a car outright? Would you pass for finance? How much could you afford to spend on monthly loan repayments? These are all important things to consider when working out a budget for a car and we’ll help you to clarify what is and isn’t important in this short guide.
Buying a car on a budget
The first thing to consider when buying a car is how much do you want to spend? This will all depend on your personal financial circumstances and you’ll need to decide how much you’re able to allocate towards your shiny new purchase. A car budget calculator can help with this.
Secondly – how new do you want to go? Brand-new cars famously lose some of their value the moment you drive off the forecourt, but there’s also nothing quite like that new car smell!
Once you’ve decided on these points, you can start shopping around for a car.
What car can I afford?
There’s a big difference between buying the car that you want and the car that you can afford. We don’t just mean you want a brand-new Ferrari but can only afford a 15-year-old Fiesta. No, there are lots of other things to consider when it comes to affordability, including:
How many mpg does the car get? If it’s electric, how quickly does it charge up?
2. Road tax costs
Road tax costs vary massively from car to car, so do your homework first
How much do parts cost to replace if something goes wrong? How much do annual services cost?
Especially if you’re a young driver, your insurance premium can sometimes cost more than the car itself, so run lots of quotes before you buy your car.
5. Parking costs
Some inner city premises charge you a fee to have a parking space – even if you live there!
Should I account for depreciation?
Something else to consider is depreciation. If you are thinking of part-exchanging an existing car to upgrade to a newer one, how much has it held its value while you’ve owned it? How well does the car you are thinking of buying hold its value? It’s not something you automatically think of when budgeting for a car, but it wouldn’t do any harm to factor it into your decision.
How much of my income should I spend on a car?
How generous are you feeling? How much do you want to treat yourself?! Even if you’re flush with cash that doesn’t necessarily mean that you want to spend it all on a car. When you’re a car owner it’s always best to make a ‘what if?’ contingency plan. Expensive repairs can come from out of nowhere, accidents happen to even the safest of drivers, and personal circumstances can change meaning that you could struggle to keep up with monthly car loan repayments, so make sure you have enough left at the end of the month to cover these ‘what if’s.’
How much should I spend monthly on a car UK?
So, how do you set up a budget for a new car? Firstly, go through your existing expenditure and see how much is left once you’ve paid all of your bills. There’s a train of thought that your income should be split equally in three ways; a third on bills, a third to enjoy how you please, and a third on savings and investments. Make sure that you have enough wiggle room to comfortably afford a car without its repayments completely taking over your life.
Even if you have the money to buy a car outright, working out what car can you can afford based on your salary is something you still need to consider. Cars need fuel, road tax, insurance, regular servicing and maintenance so when you budget for a car add all of these things up and then factor them into your monthly expenditure.
How to use a car budget calculator
Our biggest piece of advice we could give when budgeting for a car may sound obvious but once you’ve decided on a budget then stick to it! It’s so easy to have your head turned by a flashy car but if it’s going to kill you paying for it then the appeal will wear off very, very quickly. To help you with this we recommend using a car budget calculator.
This is especially important if you are considering using finance to pay for your car such as hire purchase, PCP, personal loans, or even using a credit card. Some of these methods will add interest to the cost of the car, making it more expensive, but all of them include regular monthly payments that legally need to be made. When you are drawing up a budget for a car, make sure you take this into account and be 100% sure that you can still make the payment if something unexpected happens to your income.
Considering buying a new car? Buy BIG!
So, you’ve worked out your budget, you can definitely afford it, and you’ve got a car in mind – what do you do next? Our sister company Big Motoring World have thousands of quality cars in stock and finance is available on everything (subject to status). As award-winning dealers, you can trust them to find something within your budget range and for the whole process to be as smooth as silk.
If you’re buying a car on a budget and aren’t sure what you could get for your money, drop them a line and they’ll only be too happy to help. If you want to sell your car to us to raise money for a newer motor, enter your reg number here for a free car valuation that’s guaranteed for 7 days.