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Spending Money on Your Car & How Much Is Too Much?

Spending Money on Your Car & How Much Is Too Much?
Spending Money on Your Car Is Inevitable, but You Shouldn’t Be Paying More Than You Need to Be Paying. Find Out How to Save Money Now.

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Save Money by Not Overspanding on Your Car


In most parts of the world, owning a vehicle is synonymous to complete freedom.

Cars let you go wherever you want, and whenever you need to, if you can afford it, that is. In any case, freedom isn’t free, after all.

Vehicles, even those that might seem inexpensive can be costly—getting a Junker that breaks down often can set you back more than a thousand bucks.

Another with luxurious leather seats and an excellent sound system costs more than the average person can afford in a year.

For almost 60% of people, having a vehicle isn’t an option. You need it to get to and from work, run your errands and get anywhere in this public-transit-deficient- world.

That said though, how much should you spend on your car?

How can you ensure that buying that incredible car won’t disrupt your monthly budget?

Well, here’s a comprehensive guide on the amount you need to spend on your vehicle. 

Counting Money

The Costs of Buying A Car

Vehicles are like boats and diamond rings – they’re depreciating1 assets. As soon as you drive off yours off the lot, then it starts losing value.

Almost 30% are lucky to live somewhere with reliable public transportation, and another 20% loves burning some calories by biking to work.

Still, more than 50% need a reliable vehicle to get to work and handle all their errands.

Therefore, if you’re preparing to buy a new or used vehicle, you might wonder how much you can afford to buy a car.

Here are some of the things you need to consider:

#01. Fuel Consumption

You can get lost in the fantasy of driving an expensive car and forget all the expenses that come with it.

You might also look at the monthly repayments2 of a car and decide that you can handle all the costs.

However, you need to remember a vehicle needs fuel.

Thus you have to input the fuel consumption expenses.

You also have to keep in mind that fuel prices fluctuate almost every month, so you have to put down an estimate of the fuel costs especially if you’re looking to upgrade to a different class of vehicle.

#02. Servicing & Maintenance

Servicing a vehicle, especially one that’s out of its warranty period can be expensive.

While there might be several reputable operators, you have to ensure that you compare the quotes so that you can get the best, yet cheapest deal.

#03. Vehicle License Renewal Fees

Since 2018, R72 was included in the renewal base fees for all motor vehicle licenses as a transaction fee that one requires to pay to the Road Traffic Management Corporation3.

So, as you figure out the amount you need to spend on a car, it’s wise to consider these expenses, too.

Pocket Money

#04. Car Insurance

You might forget about auto insurance, but it’s one of the most vital features you need to consider when buying a vehicle.

To get the best deal, ensure that you compare car insurance quotes online.

It’ll help get the best car insurance4 rates, the most affordable car insurance company and car insurance premiums.

How Much is Too Much?

Well, according to experts, using 25% of your salary is an excellent benchmark when calculating the amount, you can safely spend on your car repayments.

When you include the other expense though, you might look at close to 35% of your income. 

If you use a car affordability calculator and find that you might overspend on your vehicle expenses, then you should consider:

Putting Down A Deposit

When you put down a deposit, you can pay off the vehicle sooner – meaning you’ll spend less cash overall, or reduce your monthly repayments, thus making it more affordable.  

Beware of Balloon Payments

If you’re set on purchasing the car your favourite celebrity that’s out of your price range, a balloon payment might look like a tempting offer.

A balloon payment5 is basically when you agree to pay a lump sum at the end of your car’s finance term.

It helps in making your monthly repayments lower, but when the loan term comes to an end, you might not have the lump sum you need to clear the loan.

Deal Done

If you can’t pay the balloon payment, your choices are limited.

You can either ask a financial institution to restructure the vehicle finance to cater to the balloon payments, in which case you’ll pay off your vehicle for a few extra years. You can also try trading in your car for a new one.

However, doing this can restart the balloon payment cycle over again since you might be forced to include a balloon payment to finance the new ride.

Therefore, to be on the safer side, make sure that you avoid balloon payments if you can.

You don’t need the extra stress, so make sure you know everything about the balloon auto loan.

Common Questions

How Much Do You Spend Monthly on Your Car Payment?

How Much Should A New Car Cost?

What Percent of Your Income Can You Spend on Cars?

Can You Afford Your Vehicle?

How much you should spend on your car depends on you.

You have to review your budget and figure out if you can pay for all the expenses that go into owning a vehicle.

Remember that getting a new or used car will involve taking on more debt.

If you can’t make the minimum payments on the mortgage, then it might be great to consider getting a part-time job or save a little more than you can afford car debt.

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Editorial Note: This content has been independently collected by the CarInsuranceCheck advisor team and is offered on a non-advised basis. CarInsuranceCheck may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

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John Duckett

Written by
John Duckett
Founder, CarInsuranceCheck

John helps individuals get the best deal on car insurance. He advises on how to match client needs with budget and successfully negotiates with insurance houses to exceed client expectations.

Working in the online space is his passion, he loves to share his knowledge on insurance and keeps an updated blog.

How Much Should You Spend on a Car

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