Understanding affordability

How to find the right car for your budget

It can be easy to look at our handy car finance calculator and discover that you can afford an amazing car, just because that is the further your budget can stretch for the monthly repayments.

However, the reality is that working out how much you can really afford to spend on a car each month means looking beyond just your monthly repayments. Truly understanding affordability means looking at other factors as well.

Just because a car is cheaper to purchase, does not mean it will work out cheaper in the long-run. You need to look at every cost to work out whether a car is truly affordable.

Purchase costs

The first thing to consider is how much you can reasonably spend on the up-front purchase of the car. This is where it is important to look at whether you want a new or used car. When considering new vs used, it is also important to think about running costs.

It’s also very critical to think realistically about what you will be able to afford for your monthly repayments. Trying to overreach with your monthly repayments can land you in trouble later on, especially if your income is not steady or you don’t have savings.

Running costs

You might be able to cover the monthly repayments towards the car itself, but will you be able to afford to run it?

There are two types of cost to consider here; fixed costs and variable costs. Fixed costs are charges that you will always have to pay, no matter how much you drive the car. These include; insurance, road

Fixed costs

Fixed costs are charges that you will always have to pay, no matter how much you drive the car. These include; insurance, road tax and breakdown cover. Once you have purchased these, they will be the same each month.

Keep in mind that The AA says that fixed costs for even the cheapest cars can still total £1913 per year.

Variable costs

Variable costs cover everything else that is liable to change in relation to how much you use the car. For example, fuel and repair costs are included in this bracket.

You can always estimate how much you think variable costs are going to be, but keep in mind that unexpected events can increase these costs. Long journeys or broken parts will always crop up, so don’t be caught short.

Making sure you budget effectively for both your fixed and variable costs is the true key to understanding affordability.

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