It is exciting getting your first car. Little can compare to the feeling of freedom that comes from having your own wheels. It’s almost enough to make you forget the big price ticket that comes with them. Almost.
As a student you (probably) can’t afford to spend too much on your car. But that is okay because it is still possible to get a great deal.
The problem comes in when you don’t know how much you can really afford. Being saddled with car loan payments every month you can’t afford is going to be a real drag.
So, how much can you really afford to spend on a car?
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Take a good look at your finances
If your finances aren’t organised than now is the time to fix this. You can’t know how much you can spend on a car otherwise. Take a thorough look at all the money coming in, which includes jobs, scholarships, help from parents, etc. Next, look at all the money going out. How much free income are you left with? Remember to take into account any big ticket items coming as well.
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Do you have savings?
If you have some savings already then that is great news. Your monthly payments will be less and you will have lower interest rates overall. In other words, you can afford a more expensive model if you already have some savings to draw from.
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What lifestyle do you want?
If you are a student and a first time buyer then you should probably be looking at pre-owned cars in South Africa. That brand new convertible might make you look good, but how good will you feel if you have to survive on two-minute noodles to be able to afford it? On the other hand, you might be the type of person who wouldn’t mind making sacrifices to afford the car of your dreams. Think about what kind of a lifestyle is your bare minimum.
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Count the hidden costs
Unless you have huge amounts of cash lying around, you will take out a car loan and pay it off in fixed installments every month. Now here is the issue: That monthly loan repayment is not the extent of your vehicle-related expenses.
Let’s say you have followed the above steps and worked out you can spend R4000 a month on a car. Before you start looking for a car and loan that totals R400, you need to factor in the additional expenses of buying a car. Fuel is the obvious one but not the only one. There’s also insurance, repairs, servicing, e-tolls and even fines.
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Use online calculating tools
Now finally you should have a good idea how much can go towards actual payments a month. But how expensive a car can that get you? It can be difficult getting from a monthly budget figure to the purchase cost of a vehicle because you would need to factor in interest costs, but all you need to do is use an online tool.