How to Budget for Getting a Used Car

Are you thinking about buying a used car? It can be a challenging decision to make since there are numerous factors to consider, like your budget, the car's model, where to buy it, how much money you can allocate for it, and whether to pay with cash or finance it. 😯 You could be spending a reasonable amount of time doing your research and getting all the necessary information to make the best decision. But above all these factors that need thorough consideration, the most important thing to think about first is, of course, your budget. Let’s take a look at the steps on how to budget for a used car.

What Should You Do First?

It's time to get your calculator out because it's time to do some calculations! The first and most fundamental step in creating a car spending plan is to figure out your revenue and expenditure. Remember that you should calculate your income based on what you earn, after taxes, rather than your gross salary.

The second and more complex step is figuring out how much you can and want to pay for a secondhand car. Even though you can afford a high-priced used vehicle doesn't mean you should. You may have other needs to consider, or you may want to budget for your future spending like repairs and maintenance. Why not check out our picks for some of the best cars for under £5000

Assess How Much You Can Afford

The next step is to determine how much you can spend on a used vehicle. Unfortunately, many individuals skip this step and go straight to the auto dealership to make the purchase! However, this might result in a situation where you finally find that fantastic car and buy it on the spur of the moment, despite it being out of your budget range. Not a good idea!

To be sure that you are just looking at cars you can afford, define your budget first. It is recommended that you spend not more than 20% of your  take-home income on  the cost of running your car. So this is important if you are thinking of spreading the cost of the car over a certain number of months. Unless you have the available cash ready to pay outright, look at the potential outlay each month, not forgetting costs of fuel, insurance, road tax, services etc. and then what the cost of finance might be. 

Choose the Right Vehicle for You

After you've decided how much you'd like to pay for a car, you'll need to determine which vehicles will meet your budget and your family needs. Since there are many different makes and models on the market, deciding which one is appropriate for you can be challenging. As a result, there are some critical factors to consider when deciding what kind of vehicle you need.

Determine the size and type of vehicle you need. Begin by focusing your search on the vehicle type that you will use most often. For example, you can undoubtedly discard the two-seater sports car if you have a family with kids. At the same time, a seven-passenger van is probably not necessary if you’re the only one using the vehicle.

Cost of Insurance

Before you buy a car, you should look into the cost of car insurance. Most insurance companies have a free quote generator on their website, so this is a simple process. Remember that having insurance is a legal requirement before you can drive your car on UK roads. Don’t skip this step because driving without insurance is against the law. 

Cost of Maintenance 

Some vehicles are known for having mechanical issues. The last thing you want is to save money on a car only to spend a lot of money to keep it operating. You may find a wealth of information about particular manufacturers or models on the internet. The idea is to pick a car that is both dependable and affordable.

Examine the Car’s MPG

The purchase price isn't the only cost associated with owning a car. You'll want to make sure how many miles per gallon (MPG) your chosen model is likely to use if you put plenty of miles on your vehicles each year. Comparing the MPG of various vehicles is a good way to know which ones are most fuel-efficient. Super important to consider just now, with the ongoing increases in fuel costs!

Get Car Finance

If you're saving for a car, chances are you're also planning your budget for car finance. The monthly payments should be your primary focus. The basic guideline is that you shouldn’t spend more than 15% of your monthly salary on auto loan payments.

Your particular circumstances in life will decide the way you plan your budget. Of course, sometimes there isn't much you can reduce from your budget  for example rent or mortgage, food, and other necessities. But, on the other hand, if you have other expenses that you can and are willing to forego, such as your leisure or vacation budget, then you might be able to afford a more expensive used car.

Allocate for a Downpayment

The higher the initial deposit payment you can make, the better (but remember to keep back enough savings to cover unforeseen emergencies). It will definitely cost you less in the long run, since there will be less interest to pay overall, as you’re borrowing less money. Try using the Carmoola car finance calculator to get an idea of how much you need to set aside for the monthly payments if you pay a certain amount for the downpayment. 

You might also get a better interest rate when you put down a substantial down payment. 😀 Throughout the loan, there will be fewer total payments to make if you borrow over a shorter term.  A bigger deposit also means you own a more significant percentage of the vehicle. If you need to refinance your loan or sell your vehicle, this is a benefit.


Purchasing a vehicle is a significant expense. 💰Whilst it's easy to imagine oneself behind the wheel of a flashy new vehicle, don't get ahead of yourself. You can build a car spending plan that will save you from overspending on a vehicle that you can't really afford, and putting yourself into financial difficulty. Always check out and understand what you can really comfortably afford before you plunge in! Check out our article on what to do if your car budget is lower than you need