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You would like to know how much you should spend on a car depending on your salary? This is an important question, all is a question of balance, taste, lifestyle, and personal situation.
We are going to help you with that tricky question, this article will answer the main questions you ask yourself such as how much you can afford to spend on a car or what part of your salary it should be.
Let’s dive in!
Table of Contents
How much can I afford to spend on a car?
Depending on your own situation, you can spend between 15 and 50% of your annual income on a new car. It seems like a lot when coming to 50%, of course, but it really depends on your situation: your job, your savings, and of course the type of car you would like to have.
And you must ask yourself a few questions before buying a car: am I looking for a comfortable car? Am I looking for a safe car on the road? Am I looking for the most reliable car? Am I looking for a sport car?
How much of my salary can I spend on a car?
For example if you want a cheap car, that you can use everyday, for business, or pleasure, you would spend around 10 to 15% of your salary.
If you want an in between car: not too cheap, not too expensive, but safe and comfortable car to go to work for example, the percentage will go a little bit higher, and will be around 20%.
The last situation is if you are really a car lover, and if car is a really important thing for you, the percentage will be around 40% of your annual income.
This is just theory, you must now calculate with your own income if it possible to spend this amount of money in a car, that is why we designed a tool that can help you out with this.
How do I calculate how much I can afford for a car?
Our tool can help you out knowing how much you should spend on a car. We will just give you some datas that can be helpful when choosing a car:
- If you earn around £20 000, you can spend £100-150 per month approximately
- If you earn around £30 000, you would spend around £200-250 per month approximately.
- If your annual income is around £40 000, you can spend between around £300
- And if your annual income is around £50 000, you can spend around £500.
Of course, this is an estimation, it depends on your own situation, for example if you have children, if you have other responsibilities etc.
How to find the right car with my budget?
In other words, what are the cheapest car that I can afford?
Really, there are plenty of options to have a nice financed car with a small budget. If you can’t afford a jaguar because your monthly budget is £150, we will find cars that could be a good deal for you:
- For example, the iconic fiat 500 is a car that you can afford with £150 budget per month.
- Citroen C1 is another car that can be considered with £150 per month.
- Toyota Aygo is also reachable with £150 per month.
What happens if I can’t afford my car payments anymore?
It depends on the type of finance car you choose. Sometimes, it is possible to give back the car to the company. You can for example swap your current car for a cheaper one.
- If you car worth more than the agreement, you can sell it, and this will pay off the finance.
- If your car worth less than the settlement, you can complete the difference when selling it.