Top tips for setting a budget when buying a car
It's very easy to get carried away looking at cars over your budget - but speaking from experience, it's not worth it if it causes you more stress and worry every month. It's great having a lovely car but not so fun when you can't afford your grocery shopping!
Setting a budget:
Unless you are buying your car with savings, it's really important you carefully consider how it will impact your life. Think about what you can easily afford every month. How much do you pay for your car now, or how much money do you have spare that you wouldn't miss too much?
Use a budget calculator like this one to find out your finance flexibility - don't forget to make sure you're saving at least a bit every month for emergencies, and don't forget other car related costs such as fuel, tax, insurance, MOT and servicing. We go into this a little more in our financing your car guide.
When you've worked out how much you can afford to pay every month, use a car finance calculator to figure out what the total value of the car would roughly be.
Bare in mind! Interest rates on loans, Hire Purchase (HP) or Personal Contract Purchase (PCP) will depend on your credit rating. It's good to know your credit rating anyway (although the way finance companies work this out does vary slightly).
Caution! Avoid applying for any kind of finance until you are sure you want to go down that route, have a rough idea of the monthly costs, and ideally have found a car you want to buy. When you apply, the company will run a credit search which may lower your score for a while. If you apply for too much credit in a short time frame, you might be refused. Most companies will give you a rough idea of monthly cost without you having to apply, but bare in mind the interest rate may change if you're approved.
Before you get on to the really fun part (finding a car), be sure to have a look at our financing a car guide which will give you a thorough idea of all the options available to you, and the impact of car finance on your wider financial health and lifestyle.
Get in touch if you have any questions, I’m not a finance expert but will always be happy to try and help! ♥
Check out our guide to financing your new car!
Make sure you are fully informed before going into a negotiation
