How to find a car within your budget

By using our car finance calculator, you can easily start to see the total car value you might be able to afford. It provides a rough guide on what your monthly repayments and contract term could be if you wanted Moneybarn to help finance your vehicle.

However, the reality is that working out how much you may be able to spend on a car each month means looking beyond just your monthly repayments. Understanding affordability means looking at other factors involved in the purchase and maintenance of a car as well.

Just because a car is cheaper to buy, doesn’t  mean it will work out cheaper in the long-run. You need to look at every cost to work out whether a car is affordable for you.

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 think about whether you want a new or used car, as this can greatly affect the price. You should also think about what your car will be used for, when deciding what car to buy.

If you currently own a car or van, it is worth checking if you can part-exchange the vehicle, as this can reduce the cost of buying your new vehicle. Even if your current vehicle is no longer drivable, you could earn a fee by selling it for scrappage.

It’s also really important to reflect honestly on what you can realistically afford as monthly repayments. Trying to overreach with your monthly repayments can land you in trouble later on.

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

Fixed costs are charges you will always have to pay, no matter how much you drive the car. These include; insurance, road tax, MOT, and breakdown cover. The yearly cost of these will typically be a fixed amount, so you can budget to clear them annually or clear them in regular monthly payments which shouldn’t change. The costs may change year on year (apart from road tax), and it’s worth checking that you’re getting the best deal for each of these by shopping around.

Insurance premiums are calculated based on a number of different elements, including personal driving history, vehicle engine size, annual mileage and type of cover. For an in-depth guide on these factors and how to get the most for your money, check out our car insurance explained page.

Variable costs

Variable costs are other costs which could arise based on how much you use the car. For example; fuel, servicing and repair costs.

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 plan a bit extra into your thinking.

Despite certain repairs being inevitable, there are things you can do to reduce the variable costs of a car, such as buying a car with good fuel economy, considering the costs and benefits associated with petrol versus diesel fuel, and altering your driving style to be more fuel efficient. The relatively low short-term savings from these decisions can have a big impact on the long-term affordability of a vehicle.

Making sure you budget effectively for both your fixed and variable costs is the true key to understanding affordability. To help you calculate the potential cost of a vehicle, a breakdown of these can be found below:

Fixed Costs

  • Cost of Vehicle/Monthly Payments (If leased or purchased on finance)
  • Insurance
  • Road Tax
  • MOT
  • Breakdown Cover
  • Depreciation (The decrease in value of a vehicle over time)

Variable Costs

  • Servicing
  • Repairs
  • Fuel
  • Maintenance (Including oil change, windscreen fluid, cleaning)
  • Parking
  • Tolls (When driving on certain routes)
  • Fines

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