Are you in the market for a new car? Whether you’re upgrading to a new vehicle or buying your first car, shopping for a new car can often be a stressful and challenging experience.
Your car is usually the second biggest purchase you’ll make, after your home. Since cars are far from cheap, it’s important to budget appropriately and only spend what you can afford.
How much is the right amount to spend on a new car? That depends on two factors: your income and how much your car means to you. We spoke to the car experts at Warrantywise to find out exactly how much you should spend on a new car.
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Need something simple? Spend 10-15% of your pre-tax salary
Do you think of your car as a convenient way to get from one point to another? If you only need a car for transportation and don’t care much about performance or comfort, budget around 10-15% of your pre-tax salary.
This means that if you earn £30,000 per year, you can afford spend £4,500 or less for your car. At this price point, you’ll be able to afford a compact car that’s around two to three years old with a fairly low mileage.
Want something comfortable? Spend 25% or less of your salary
If you’d like something a little more comfortable, you’ll need to increase your car budget. Spending 25% of your salary on a car lets you, at a salary of £30,000 per year, spend about £7,500 on a vehicle.
At this price point, you’ll be able to afford a new compact car or a slightly used city or family car. Search for cars that are two to three years old – these cars have lower priced due to depreciation but are often still in excellent condition.
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Are you a car guru? Spend up to 50% of your annual salary
Do you view your car as part of your identity? If you’re a car person who can’t live without a great vehicle, it’s alright to spend slightly more than you normally would to get something you like.
Try to avoid spending more than half of your salary on a vehicle. For £15,000, you’ll be able to afford a huge selection of used cars and a variety of new cars such as the Ford Focus or Peugeot 308, which are both priced at under £14,000.
Which category do you fit into?
Are you a car guru or someone that views a car simply as a way to travel? Work out which of the above categories you fit into to determine how much you can afford to spend on a new car.
