Buying a car is a considerable expense and should be carefully budgeted for
Every day marketers are trying to convince consumers to buy certain products and even vehicles. This marketing is further amplified by influencers who punt certain brands.
However it is important to make purchasing decisions based on what you can afford rather on what you want.
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Getting into excessive debt by making purchases that stretch your budget to such a point that you have no spare funds should an emergency arise, is not responsible financial decision making.
Whether you are shopping for a new or pre-owned vehicle, the thrill of owning the car of your dreams comes with its own set of financial responsibilities.
Instead of compromising your financial situation a new vehicle should positively contribute to your work, lifestyle and sense of independence
The general rule is that you shouldn’t spend more than 20% of your total income on vehicle repayments, while also taking into consideration other vehicle expenses such as fuel, insurance, maintenance and service costs.
Vehicle finance calculators give you a range of finance options and a good idea of what you can afford, based on your current monthly income
Choosing the car you can afford and not necessarily the one you want, is an indication of exercising financial maturity, discipline and independence that will benefit you in the long run.
When shopping this means knowing your budget, sticking to it and being realistic about the car you are looking at.
While there are a variety of finance options available, the best option is to save as much as possible, as a larger upfront deposit will reduce your capital balance and the amount of interest you will pay over the contract term.
A good idea is to consult a car finance repayment calculator, which will give you an idea of the monthly repayments that will be required for your vehicle of choice.
As part of your savings plan, you could then put a similar amount aside each month, which will help you get used to making that monthly payment and give you a real idea of whether you can afford it, while also being a great way of saving up towards some kind of deposit.
Shopping online and visiting dealerships to find the car that fits your needs and budget will give you a clearer idea of what you need to save towards.
Additional vehicle expenses
While the monthly repayment is one thing, there are a number of other expenses that add to the costs of owning a car
It is very important to take out insurance, preferably comprehensive insurance cover.
The cost of insurance varies and is determined by the make and model of the vehicle, the driver’s age and driving experience, how regularly the car is driven and where you live amongst other factors.
With the ever increasing fuel price, this expense is becoming a much larger portion of monthly vehicle expense and is something that needs to be budgeted for according to how many kilometres you plan on driving per month.
Vehicle maintenance and service expenses can be costly especially as a vehicle gets older.
Many new cars are sold with a service or maintenance plan that covers the cost of certain items. However these plans vary between three and seven years and should form part of your purchasing decision.
If the vehicle you buy or drive has no such plan in place any longer, you should budget for service and maintenance costs accordingly.
Service intervals are specified by the manufacturer and regular servicing will ensure that your car remains reliable while it will also maximise the resale value of the vehicle.
Buying a car is an exciting experience but it is also a purchase that requires responsible budgeting.
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By: Reuben van Niekerk