How to Determine How Much You Can Afford to Spend on a Car

Before you start searching for your dream car online, you have to touch base with reality. Whilst you may want to drive a sporty convertible, you may need to focus on cars that have stand-out records with respect to repairs and petrol use.

Whether you are buying a car for the first time or you wish to replace a current make and model, you need to review your budget before you check a dealer’s inventory online.

Financial professionals recommend that car buyers spend about 20% of their net pay on car costs. To make sure that you follow this formula, plan on spending about 10% on the payment and the other 10% on the costs of ownership.

Ownership Costs

Ownership expenses include the following:

  • Vehicle insurance. This amount is usually about $1450 per year. However, that amount depends on certain risk factors such as your age, gender, where you live, credit history, driving history, and vehicle make and model.
  • Car repairs, including tyre repair and replacement.
  • Ongoing maintenance.
  • Transportation expenses, such as parking.
  • Licencing costs.

While this method may not work for everyone, it can be followed if you receive a regular income weekly or bi-weekly.

When looking at the used cars in Canberra, you need to consider the ownership costs of the car that you want to buy. The expenses involved in owning a car depend on the condition of the car and how much you want to pay each month. While some cars are pricier, they may save you in repairs. Therefore, you need to think about where you want to direct your money.

Researching the dependability of the car you want to buy will help you figure out how much you want to spend. You also have to think about your insurance premium. Used cars normally come with lower premiums than newer model cars.

Cars That Are Less Expensive to Own

According to one car membership provider, cars that have lower ownership costs include hybrids, smaller SUVs, electric cars, and smaller sedans. You will spend more for ownership if you buy a large sedan, medium SUV, or pickup. Therefore, you need to do your homework before you choose a dream vehicle. If you want to save on repair, this is important. Otherwise, your dream car could become a nightmare to own.

You also need to know your credit rating if you plan to finance your car. By having a higher rating, you can finance a new or used car at a lower interest rate. You can also establish certain expectations with respect to monthly payments. Again, a higher rating will keep your payments lower. If you want to elevate your own score so you can reduce your payments, keep making your payments on time each month and keep your credit balances low. Don’t open any new credit accounts unless it is necessary.