Buying a new car can be incredibly exciting. After all, everyone enjoys a change after a while – there’s only so long you can put up with driving a gas-guzzling monster.
Before you head down to your nearest car dealership and buy the first car you see though, there is one key thing you need to consider: your budget. Going in, you need to know which type of car you can realistically afford to buy and run, otherwise you could find yourself in a lot of financial trouble down the line.
Fortunately, we’re here to help. Following our five steps below, we break down the purchasing process to make it easier for you to calculate which cars you can afford.
- Dream car vs. income.
First things first, don’t set your heart on a car you know that you realistically can’t afford. While it may be tempting to give in and buy the car you’ve always dreamed of having, it’s more important for your budget to dictate your choice of car, rather than the other way around.
Review your income and then take away any and all of your current monthly expenses – phone bill, broadband, energy, water, student bills, credit card repayments, etc. Once you’ve done this, you’ll have a greater idea of how much money you have left over to spend each month. If you have £400 disposable income left each month to cover your shopping costs, for example, buying your dream car on a £300 a month finance deal might not be the best plan.
- Don’t forget about the maintenance.
Buying a car isn’t all about the price you pay up-front – you need to consider the maintenance costs on top as well. From petrol prices and car insurance, to roadside assistance and unexpected repair work, a new car will always need money spent on it.
Think about each car’s miles-per-gallon (MPG) ratio and look at reviews from previous customers to see how much longevity you can expect. Also, make sure you have money set aside to cover any unexpected costs later on.
- Think about finance.
Let’s face it – cars don’t come cheap, so car finance deals are a great way of making repayment costs more manageable. However, as mentioned earlier, knowing your budget is vital to working out how much you can realistically afford to pay back each month.
What’s more, since finance deals are effectively a loan, it’s important to think about the length of time you want to pay it back for. According to Edmunds, the current average length of loan is 72 months – 12 months longer than they recommend it should be.
In general, the longer you choose to make repayments for, the more interest you will end up paying, which will affect how cost-effective your deal actually is.
- Budget sorted? Now, what car do you actually need?
OK, so you’ve sorted out your budget, now it’s time to think about the actual car you want to buy. While it can be tempting to go for the sportscar you’ve always dreamed of, ask yourself whether it’s really practical. If you have a young family, for example, having a bigger car with more seating options, a better safety profile and a decent MPG rate, could be a much more better option in the long run.
You also need to think about where you live, and the climate you face there. Do you need an all-wheel drive that is better equipped for snowy conditions? Or, do you live in a country where you’ll need a flawless air-conditioning system? By honestly assessing your wants and needs, it’ll make your car search all that much easier.
- Start your search.
You’ve worked out your budget, know how much you can afford to repay each month, and have a few car models in mind – now you can start your search. Head down to your local car dealership to ask their advice, see cars in the flesh, and set up test drives. How a car looks and feels can make a big difference to deciding which one to go for.
When you’ve decided on the model, look at insurance quotes and shop around at other dealerships to find the best deal. Also, don’t be afraid to look at used cars, as often these can be a lot cheaper and more cost-effective to buy than some of the brand-spanking-new models out there.