Understanding your budget and the total cost of financing is essential to making a responsible decision. We explain more here...
How Do I Know If I Can Afford the Car I Want on Finance?
Buying a car on finance is a great way to spread the cost of your vehicle over time, but how do you know if you can afford it? Understanding your budget and the total cost of financing is essential to making a responsible decision. Here’s how to determine if the car you want fits your financial situation.
1. Calculate Your Monthly Budget
Before applying for car finance, take a close look at your income and expenses. Consider:
Monthly earnings (salary, benefits, side income)
Essential expenses (rent/mortgage, bills, food, loans)
Savings and emergency funds
Existing debt repayments
A good rule of thumb is that your total car finance costs should not exceed 15-20% of your monthly income.
2. Understand the Total Cost of Car Finance
The price of the car isn’t the only cost to consider. Factor in:
Deposit – A larger deposit lowers monthly payments.
Interest rates (APR) – A higher APR means higher monthly costs.
Loan term – Spreading payments over more years lowers monthly payments but increases total interest paid.
Insurance, fuel, tax, and maintenance – These costs add to your monthly car expenses.
3. Use a Car Finance Calculator
Using our online car finance calculator helps you estimate monthly payments based on the loan amount, interest rate, and repayment term. This tool allows you to adjust variables to find a deal that fits your budget.
4. Check Your Credit Score
Your credit score affects the interest rate you’ll be offered. A higher score means lower interest rates, reducing overall costs. If your score is low, consider improving it before applying.
5. Consider Future Financial Stability
Think long-term. Can you afford the repayments if:
Your expenses increase?
Your income changes?
Unexpected costs arise?
6. Get Pre-Approved for Finance
Pre-approval gives you a clearer idea of how much you can borrow and the likely interest rate, making it easier to set a budget before choosing a car.
Final Thoughts
Before committing to car finance, assess your income, expenses, credit score, and total finance costs. Use a car finance calculator and consider pre-approval to ensure the car you want fits within your budget. Being financially prepared ensures stress-free car ownership!