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How Much Should You Spend on a Car Based on Your Salary?
Buying a car is a major financial commitment, so one of the first questions to ask is: how much should I spend on a car?
Your salary is an important starting point, but it should not be the only factor. Your existing expenses, debt, savings, insurance, fuel costs and other financial commitments all affect how much you can comfortably spend.
Instead of choosing a vehicle based only on what a finance calculator says you can borrow, consider what you can realistically afford each month.
By OMC Motors, South Africa
Start With Your Monthly Income
Begin by understanding your monthly income after deductions.
Your take-home income gives you a clearer picture of the money available for household expenses, debt repayments, transport and other commitments.
From there, create a realistic monthly budget.
Include expenses such as:
- Rent or home loan
- Groceries
- Utilities
- Existing loans
- Credit card payments
- School or childcare expenses
- Insurance
- Transport
- Savings
- Other regular commitments
The amount left after these expenses gives you a better starting point for considering your vehicle budget.
Don't Focus Only on the Monthly Instalment
A common mistake is looking at a vehicle’s monthly repayment without considering the full cost of ownership.
Your vehicle budget can include:
- Finance repayment
- Fuel
- Insurance
- Servicing
- Tyres
- Licensing
- Maintenance
- Parking or tolls
A vehicle with an attractive monthly repayment can still become expensive when all these costs are included.
Nedbank’s guidance on the real cost of owning a car similarly highlights that the finance instalment is only one part of the overall monthly vehicle cost.
Consider Your Existing Debt
Existing debt can affect how much you can comfortably spend on a vehicle.
If you already have personal loans, credit cards or other monthly repayments, these commitments reduce the amount of disposable income available for a new vehicle.
Affordability assessments consider income and existing financial obligations when determining whether credit can be repaid without causing over-indebtedness.
This is why two people earning the same salary may have very different vehicle budgets.
Think About Your Lifestyle
The right vehicle budget depends partly on how you use your car.
Someone who drives short distances around the city may have different requirements from someone who travels long distances every week.
A family may need a larger SUV, while a single commuter may prefer a smaller hatchback.
Someone running a business may require a bakkie for transporting equipment or goods.
Choosing the right vehicle means balancing what you want with what you actually need.
Consider the Deposit
A deposit can reduce the amount that needs to be financed.
For example, if you have savings available for a deposit, you could potentially reduce the amount financed and therefore change the repayment structure.
However, do not use every available rand for a deposit without considering your emergency savings and other financial priorities.
Your finance provider will determine the applicable terms based on your application and assessment.
Use a Vehicle Finance Calculator
Once you have a realistic budget, use a finance calculator to explore different scenarios.
OMC Motors’ vehicle finance calculator allows users to adjust the vehicle price, deposit, interest rate and repayment period to estimate potential monthly payments.
Try different vehicle prices rather than calculating only the most expensive car you are considering.
This can help you compare how a more affordable vehicle could change your potential monthly repayment.
Consider a Longer Repayment Period Carefully
A longer repayment period can reduce the monthly instalment because the amount is spread over a longer period.
However, a longer term can also mean paying interest over a longer period.
For this reason, do not choose a repayment period based only on the lowest monthly figure.
Look at the overall finance structure and consider how the repayment fits into your long-term budget.
Don't Forget Your Future Expenses
Your current salary and expenses may change.
You may have future plans involving a home, family, education or other major financial commitments.
A vehicle repayment that is manageable today could become more difficult if your expenses increase.
Leaving some room in your monthly budget can provide greater flexibility if circumstances change.
Choose a Vehicle That Fits Your Budget
Once you understand your budget, start comparing vehicles within that range.
OMC Motors provides a range of pre-owned vehicles across different makes, models, prices and specifications. Current listings include different body styles, fuel types, transmissions and price points.
Instead of starting with the most expensive vehicle you can potentially finance, consider the vehicle that gives you the features and practicality you need while remaining manageable within your budget.
Take the Next Step With OMC Motors
If you are asking how much should I spend on a car, start with your complete monthly budget rather than your salary alone.
Consider your existing commitments, vehicle running costs, potential finance repayment and future financial plans.
Once you have established a comfortable range, browse vehicles that fit your requirements and use the OMC Motors finance calculator to explore potential repayments.
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Frequently Asked Questions
How much of my salary should I spend on a car?
There is no single percentage that works for everyone. Your vehicle budget should consider your income, existing expenses, debt obligations and total vehicle ownership costs.
Should I calculate my car repayment before choosing a vehicle?
Yes. Estimating repayments can help you compare vehicles and avoid focusing on options outside your intended budget.
Does a deposit make a car more affordable?
A deposit can reduce the amount financed, but you should consider your savings and other financial needs before deciding how much to put down.
Should I buy the most expensive car I can afford?
Not necessarily. A more affordable vehicle may leave more room in your budget for insurance, fuel, maintenance, savings and unexpected expenses.
What other costs should I budget for?
Consider fuel, insurance, servicing, maintenance, tyres, licensing, parking and tolls in addition to your finance repayment.
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