What Car Can I Afford Based on My Salary?

Picking the right car is extremely important as it’s one of the more expensive purchases you can make. Used and nearly new cars will depreciate less than new, so it’s best to look at them instead of brand-new models if looking to save. You’ll also get much more for your money when picking a second-hand car since depreciation won’t be that much of a worry. 

Car Running Costs


According to the Car Expert, the average Brit spends £388.45 a month on car expenses which also includes monthly car finance payments.

Often, people underestimate the real cost of a vehicle it’s not just monthly finance payments that go in a price. You should consider a few things beforehand:

  • Insurance

    With an average yearly insurance cost of £471, it is one of the more expensive parts of car ownership. 

  • Finance Interest

    Car finance interest is based on your credit rating, which can range from excellent and good, all the way to bad. The worse your credit score, the higher interest rate. 

  • Deposit

    You can make car purchasing more affordable by paying a larger deposit sum or part-exchanging current car towards a new one. However, don’t underestimate the cost of the upfront deposit as it is one of the higher upfront costs.

  • Road Tax

    How much you pay will depend on the car’s CO2 emissions and registration date. Cars registered on or after 2017 have higher rates than vehicles registered before 2017.  

  • Fuel

    According to Motoring Research, average monthly spend on fuel is £67.63 a month – so take your pick between petrol, diesel or electric (free!) options. 

  • Servicing and Maintenance

    Depending on where the car is serviced, and the type of service is carried out, on average you can expect to pay between £100 upwards £200. Don’t forget to add in an MOT which is £54.85. 

  • Repair Costs

    You’ll pay around £150-£160 on unexpected repair costs yearly (based on an average £13.26 a month). 

All these costs must be weighted to get the complete picture of the car ownership. The vehicle won’t be running without any faults forever, so budgeting for things, such as repairs is key.

For the full information on all the car costs, expert tips and more refer to our lengthy ‘How to buy a car’ guide.

Car Finance Restrictions


Familiarize yourself with car finance deals, whether that’s PCP or HP. Also, check the restrictions and what’s included in your finance. Here are a few limitations that you may come across, which could pile on the costs if you’re not careful:

Mileage


If you go over the agreed mileage limit, you’ll need to pay the price. Keep this in mind if you’re taking out a PCP deal. 

Balloon Payments


Monthly finance payments on Personal Contract Purchase are usually cheaper because of a balloon payment which needs to be paid at the end of the agreement if you want to own a car. 

Depreciation


If you’re financing a new car via a Hire Purchase finance, then depreciation will most certainly apply in this situation. Prepare yourself for this by researching which cars lose the value slower. 

Mileage


If you go over the agreed mileage limit, you’ll need to pay the price. Keep this in mind if you’re taking out a PCP deal. 

Balloon Payments


Monthly finance payments on Personal Contract Purchase are usually cheaper because of a balloon payment which needs to be paid at the end of the agreement if you want to own a car. 

Depreciation


If you’re financing a new car via a Hire Purchase finance, then depreciation will most certainly apply in this situation. Prepare yourself for this by researching which cars lose the value slower. 

So, how to find the right car for your budget?

The first step towards having a car is calculating the budget. Most people simply go with the flow and pick a car they like. However, that’s not always the best decision as it’s easy to overestimate the amount you can afford.

The best starting point is your salary. Ask yourself these simple questions:

1.      How much do you take home after tax?

2.      What are your monthly expenses? You can create a simple spreadsheet to monitor your spending or download a budgeting app for a quicker and more convenient solution. 

10-15% Rule


As a rule of thumb, spending 10-15% of your annual salary after the expenses is a sensible way to budget for a car. This includes not only monthly car finance payments, but the running costs as well. 

Monthly Car Finance Payments based on a Salary

Cars for £100-£150 a month

Salary range - £18,000 - £23,000/year. For this price you should look for a small and economical car to minimize running costs.

Cars for £200-£250 a month

Salary range - £24,000 - £30,000/year. This is the average wage in the UK - which means you can find more suitable options when it comes to picking a car.

Cars for £300 and above a month

Salary range - £36,000 and up. You can afford almost every used car with this pay range, check them out below:

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