Which car do you want? That’s the easy bit. Working out whether you can afford the monthly finance instalments with your salary – that’s the hard bit! Alan Quinn sets outwhat you need to keep in mind when making this weighty financial decision.

You want a car, but there are so many choices. Do you find it tough to choose what you want?

Now, let’s get real for a second. Deciding which car you WANT is, in actual fact, EASY. Every time I drive to work I see cars that I want! The tricky bit is whether you can AFFORD it onyour salary. Cars cost a lot of cash and vehicle-finance agreements can be 6 years long – that’s a serious financial commitment.

This article deals with the logic you should apply before making a vehicle purchase decision. Of course, you don’t necessarily need to apply logic – you can just go with your feelings and follow your dream. “Fake it till you make it,” as they say. You would not be the first person to do this– or the last– but, if you want to live with less stress for the next 6 years, I suggest you read on!

Quick Fix: Cars.co.za has created a handy Affordability Calculator to help you work out the value of the car you can afford, plus enable you to draw up a realistic monthly budget, which I describe below. The best advice is to quickly read the article below and then use the Calculator.

Step 1: How muchMoola have you got coming in?

Start with your “net income”, which is your salary AFTER the South African Revenue Service (SARS) has taken its cut (deducted pay-as-you-earn tax). In other words, it’s the amount at the bottom of your payslip and the line on your bank account which says “salary”.

Step 2: What are you paying for a car right now?

Are you paying off a car right now? If so, how much is that per month and does it seem easy –or a real burden –to meet those payments?

Step 3: What are your current expenses?

To be completely honest, this is the toughest question to answer, because working out what you spend on things that you HAVE to do, versus things that you WANT to do, can be difficult.

Start with things where you have signed a contract. Think about credit agreements such as loans, store cards, credit cards etc. You cannot avoid them because you have committed to them; they’re also the first things banks will look at to decide whether you can afford more credit.

Then think of everything else. If you are going to buy a car, then the monthly instalments on the vehicle finance agreement (car loan) might mean that you have to live without some of these.

Tip #1: As a general rule, your car budget should not be more than 20% of your net income. That is the figure you got in Step 1 minus the things you MUST pay in Step 2.

Tip #2: If you have too many credit commitments already, the bank will start to get nervous and regard you as a higher-risk candidate for a vehicle finance agreement. This will result in you paying a higher interest rate (the Cars.co.za Affordability Calculator takes this into account).

Read More: How to get a good credit score for vehicle finance

Step 4: Are you keeping up with your payments right now?

This is a reality check for a couple of reasons. If the answer to this question is not a clear YES, then you need to ask yourself a hard question. Car Finance generally starts at R3 000 to R4 000 per month. If the current bills are making you sweat each month then how do you expect to pay that kind of moola each month in car payments, as well as insurance-, fuel- and servicing costs.

Tip #3: If you are not regularly keeping up with your current payments, then your bank (or other banks) may think of you as a “high risk” candidate. You may be refused a new loan, or at least have to pay a high interest rate. The Cars.co.za Affordability Calculator takes this into account.

Now Get Started:

I hope this article has given you some background. Now jump across to the Cars.co.za Affordability Calculator and start your search for a car that will fit your monthly budget.

If you are considering selling your car, you can sell your car fast, easily and safely on Cars.co.za

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