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the #1 consideration when buying your first car
Before you start looking at makes and models, there’s one thing you need to consider first.
Buying your first car is a big and exciting milestone with many considerations. The make and model options, the vehicle specs you need to evaluate, the car-buying tips from well-meaning friends and the various deals popping up in your social feeds… It’s really a lot to think about.
Luckily, the most important consideration when buying a car will help you narrow those options down. And that is…
What can you afford?
When it comes to affordability, many first-time car buyers may not know what it all involves.
Being pre-approved for car finance is when your bank works out how much you can afford to spend on a car. It’s a good idea, but it can be misleading, because pre-approval only really considers the monthly instalment on the car and none of the other expenses that come with owning a car.
A general rule of thumb is that the total price of the car you buy, shouldn’t be more than 30% of your annual gross salary (your monthly salary before deductions x12). If you have other debt, this percentage could be smaller.
Your monthly car expenses, of which your instalment will be one, should not be more than 10% of your gross monthly salary. That is, as long as you can free up 10% of your salary for these expenses (without cutting into your budget for food and other necessities).
How to budget for a new car
There are monthly expenses related to your car as well as annual and unexpected expenses that you need to budget for.
For a Toyota Yaris, for example, a service outside of a maintenance plan can cost from R1 400 to R3 000, depending on whether it’s a minor or major service and is required, on average, every 10 000km to 20 000km. A good guideline is to service your car annually, regardless.
Your monthly expenses may include, but are not limited to:
- the monthly instalment (if you’ve financed your car)
- insurance (it’s required if you finance your car and can cost R200 or more)
- a maintenance plan
- credit life insurance
These costs shouldn’t exceed 10% of your monthly salary.
Annual and unexpected costs may include (but are not limited to):
- regular services (if not on a maintenance plan) and repairs
- wheel balancing and alignment
- vehicle licence (about R288 for a light motor vehicle)
- tyre replacement (for instance, new tyres for a Hyundai i20 can cost R500 or more each)
- regular cleaning
- excess on any insurance claims (often a minimum of R3 000)
If you’ve financed your car, it’s important to note that it belongs to your bank until you’ve paid it off in full and ownership has been transferred to you. So, if you miss payments, the car can be repossessed. That’s why you should know exactly how much your car will cost you. It will help you to refrain from commiting to costs you can’t maintain. Get quotes for your insurance, maintenance plans, new tyres, and what a regular service could cost outside of a maintenance plan.
Set up a savings account to put away the estimated expense monthly. Doing this regularly will help you to get used to the payment. These savings can then be put towards a deposit when you’re ready to buy the car, which should bring down the monthly instalments.
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a car to match your salary
A good rule of thumb is that the price of the car should be no more than 30% of your annual gross salary, and your monthly car costs no more than 10%.