How to Budget for Your Next Car in 3 Steps

If you’re in the market for a new car, then you’ll want to create a budget, whether you’re saving up for the purchase, you’ve already got the cash handy or you’re going to need a loan. Here’s how to budget for your next car, no matter your situation.

Step 1. Create a Budget

The first step when creating a budget for your next car is to look at your current budget. Don’t have one? Now is the perfect time to start budgeting. A good way is to budget according to the timing of your wage. If your wage is paid fortnightly, then it’s a good idea to create a fortnightly budget. If it’s paid monthly, create a monthly budget. This simply makes the process a little easier. There are also many budgeting apps to help you.

Start by downloading a budgeting app, or create a humble spreadsheet and list all of your current expenses. Then open your online banking accounts and add in all of your expenses over the past fortnight or more and organise them into categories, such as home improvements/maintenance, work expenses, internet, groceries, etc. From there you will know exactly what you’re spending now and what you can afford to save.

Step 2. Consider Your Purchase

The next step is to pick your car. You’ll want to come up with a list of needs and potentially a list of wants (if your budget allows it). Do your research first and take a look at what vehicles on the market are currently selling for online and in your area. You’ll also need to decide whether you want to buy new or used. Buying used is always the better option on a budget but this is something you’ll need to decide for yourself. Create a list of cars that fit the bill (your needs and wants list as well as your budget).

Step 3. Budget Accordingly

Now that you know how much money you have left over each pay and you know what type of car you’re going to buy, you’ll need to budget accordingly. If you’re going to save up for a car, then you’ll need to create a budget to set aside money on a regular basis. You’ll also need to consider your timeline and how long you can realistically go without needing the new car. Will you be taking the bus to work? Or are you still able to get by driving your old car until you can afford to upgrade?

If you’re in need of a loan, then you’ll want to do your research and consider different lenders. It’s not always the best option to get a loan through your current bank or financial institution. Oftentimes, it pays to look elsewhere. You’ll also need to factor in the loan to your budget and come up with a payment plan. Don’t simply make the minimum repayments. You can always save a lot of money by paying more on top of the minimum repayments, so make sure you choose a loan that allows you to do this.

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