Before you start browsing forecourts or comparing finance deals, one of the most important questions to answer honestly is: how much car can I actually afford? Getting this right will protect your financial wellbeing and ensure you enjoy your new car without money worries.

Start With Your Monthly Budget

The most widely used rule of thumb is that your total car costs — including finance payments, insurance, fuel, and maintenance — should not exceed 15–20% of your net monthly income. Finance payments alone should ideally stay below 10–15% of your take-home pay.

For example, if your monthly take-home salary is £2,500, aim to keep finance repayments at or below £250–375 per month.

Account for All the Running Costs

Many buyers focus exclusively on the monthly finance payment and forget to factor in the full cost of running a vehicle:

• Insurance: Can range from £500 to over £2,000 per year depending on age, location, car type, and driving history.
• Fuel: The average UK driver covers around 7,400 miles per year. Fuel costs will vary significantly between a petrol, diesel, hybrid, or electric vehicle.
• Road tax (VED): From zero for fully electric vehicles to over £600 per year for high-emissions cars.
• Servicing and tyres: Budget at least £300–500 per year for a new car, more for older or premium vehicles.
• MOT: Required from year three onwards.
• Breakdown cover: Optional but strongly recommended.

Use a Deposit Wisely

A larger deposit reduces the amount you need to finance, which lowers your monthly payments and the total interest paid. However, it is generally not advisable to drain your emergency savings to fund a car deposit — try to retain at least three months of living expenses in savings at all times.

Consider the Total Cost, Not Just Monthly Payments

Low monthly payments can be misleading. A 72-month (six-year) finance agreement will have lower monthly payments than a 48-month (four-year) deal, but the total amount repayable will be considerably higher due to the extra two years of interest.

Always calculate the total amount repayable — the sum of all monthly payments plus any deposit and balloon payment — to understand what the car truly costs you.

The Cost4Cars Affordability Calculator

Our free Affordability Calculator helps you work backwards from your comfortable monthly budget to identify the maximum vehicle price you should be considering. Enter your income, existing financial commitments, and preferred finance term to get a clear picture of what you can genuinely afford.