Looking to buy a new car? When budgeting for a new or used car, there are various other costs to consider in addition to the car’s price and the payments you’ll make each month if you opt for a finance option. You’ll also have to consider running costs, insurance costs, road tax, and so much more.
There’s a lot to think about when buying a new car, which is why – for this reason, budgeting is extremely important. You shouldn’t just rush over the budgeting process, you must take a thorough approach and properly budget all of the associated costs. We’ve got you covered, here’s our guide on why properly budgeting a car is important.
Why you should take budgeting seriously
Buying a car is a big investment – aside from buying a house, it’s one of the biggest purchases you’ll make, and you might well be splashing the cash on a prestige or luxury vehicle.
As well as being a huge investment, a car is a necessity, something that you’ll need every day for a myriad of purposes, whether it be for commuting to work and back, or for picking up your groceries from the shop. What we’re saying is, a car is a huge investment that you need to get right, so taking budgeting seriously is of the utmost importance. Whether you’re searching for cheap cars under 3000 pounds or luxury coupes, budgeting is imperative.
You don’t want to have to take out a loan to cover the insurance costs of your car or struggle to pay for things like MOTs because you hadn’t budgeted the overall related costs of your new car. Good budgeting is being prepared, so you need to have your wits about you.
Budgeting helps determine how you pay for the car
There are two main ways of paying for a car nowadays, be it a brand new motor or a used car from a dealership, and budgeting can help you determine which path to take.
You can either buy a car outright (cash) or pay with finance, whereby you pay for the car in monthly instalments for roughly a 3-year period. By carrying out an adequate budgeting plan, you will be able to work out everything from the running costs to the insurance of a car, helping you decide which payment route you should opt for.
Car finance actually works out more expensive in the end but allows you to only spend a small amount a month, this way you will likely have more than enough to cover all the other costs associated with the car. If you choose to buy a car outright, you will pay the full amount of the car’s price and could struggle to cover all other expenses, unless you stick within your budget, of course.
It is also worth mentioning that you can pay for car insurance with a finance option, in monthly payments, rather than paying the full amount each year.
Working out running costs: an important part of budgeting
Running costs are the everyday costs of running your car, this involves the cost of filling up on fuel, servicing your car, and repair costs. It basically encompasses all of the costs associated with owning the car, even if you’re not driving it at times. These are the prices you have to pay to actually drive the vehicle.
On average, car owners in the UK spend over £2,500 a year on running costs alone, which is, of course, quite a hefty cost on top of the other car expenses you have to consider.
Even though the cost of operating a used car is greater, a new car will depreciate faster over the course of the year which will, in turn, reduce the amount of money you can receive when it comes to selling it.
Have peace of mind with proper budgeting
If there’s one thing that properly budgeting for a new car can provide, it’s peace of mind and a stress-free approach to owning a car. You can worry less about other expenses further along the line of owning a car if you properly budget it.
It’s quite easy to fall into the trap of purchasing the costliest vehicle you can possibly buy, and although everyone wants to drive the greatest vehicle imaginable, it can be easy to overlook all the associated expenses and be drawn in by the purchase price. Budgeting allows you to look at all the costs and work out exactly what you need to pay each year.