When looking for a new or used car it’s important to work out what car you can afford to buy. While your goal may be to get behind something sporty and fast, you may be better off getting something that has lower monthly repayments and cheaper running costs. Our guide will help you work out your budget and estimate running costs for your car, so you can estimate how much you can afford to spend on a car.
- What’s your budget for a car?
- What are the running costs for a car?
- What car can I afford with my budget?
What’s your budget for a car?
You’ll need to work out the overall budget you have available for your car. This won’t just be how much you feel you can spend overall and will generally fall into the following:
- How much you want to spend overall
- How much you can afford to put down as a deposit
- How much you can afford to spend monthly on repayments
- How much you can afford to spend on running costs of the car
For the overall costs, you’ll need to work out how much you can afford to spend on a car as a final figure. This is the total you want to spend on the car and you need to have this figure in mind before you start working out monthly costs. Work out how much money you have put aside and whether you have enough to buy a car outright or whether you need to buy a car on finance.
Next up, if you are using car finance, you’ll need to work out what your deposit is going to be. In some cases, a deposit may not be required, but overall if you go in with a strong deposit it will make your monthly repayments lower.
Once you’ve worked out your deposit you need to work out how much you can afford to be paying off each month. While you may only be able to afford a slightly cheaper car overall, you may be in a situation where you can afford to have higher monthly repayments, or vice versa. So work out what you can afford to spend on a car, and what lenders will be willing to let you repay. Take interest into account here, as this will affect the overall cost of the car, especially in longer repayment plans.
It’s worth working out what percentage of your annual income you can afford to put aside. In some cases this could be around 10-15% if you’re after something more affordable but could rise to 20-25% if you want something more reliable and safe.
What are the running costs for a car?
Outside of the actual hard costs of buying a car, you need to work out what your estimated running costs for a car will be. This includes things such as the following, but other costs may come up:
- Extra fees for going over your mileage allowance
- Vehicle tax
- Depreciation of the car
All of these can add up to a hefty sum if you’re not careful, so it’s a good idea to incorporate these into any monthly budgets you are putting together. They can greatly impact how much you can afford to spend on a car.
What can I afford to spend on a car with my budget?
Once you’ve worked out your overall budget you can start working out the types of cars you can afford by looking through the for sale sections on ChooseMyCar. Each car manufacturer and car model will fall into different budget brackets and the overall affordability can also change depending on your credit score, so keep all of that in mind when you’re looking.
Each type of car finance will have different repayment options and could open up different manufacturers or models, so also keep this in mind when you’re working out your budget and desired car.