How Much Car Can I Afford?
Affordability is not the monthly payment a lender will approve. It is the payment plus everything else the car needs, sustained for years, without squeezing the rest of your life. Here is a straightforward way to arrive at a number you can defend.
Work from total monthly cost, not purchase price
A car generates five recurring costs and one that only appears when you sell. Add them up before you look at any advert.
- Finance payment or the monthly equivalent of cash spent
- Insurance
- Fuel or charging
- Servicing, tyres and the repair fund
- Tax, parking, tolls, and any inspection fees
- Depreciation — invisible monthly, very real at resale
A usable rule of thumb
Keep all car costs together under about 15% of take-home pay, and finance payments alone under about 10%. Those are ceilings, not targets. If you have significant other debt, or an unstable income, come down from there.
On a €2,500 monthly take-home, that means roughly €375 for everything car-related, of which no more than about €250 should be a payment.
| Monthly take-home | All car costs (15%) | Payment ceiling (10%) |
|---|---|---|
| €1,800 | €270 | €180 |
| €2,500 | €375 | €250 |
| €3,500 | €525 | €350 |
| €5,000 | €750 | €500 |
What a cash purchase really means
Paying cash removes interest, which is the cleanest saving available to a car buyer. But do not empty the buffer to do it. A used car will eventually present you with a bill — tyres, a clutch, a suspension component — and having to borrow for that at credit-card rates undoes the saving several times over.
Leave a repair fund of at least €1,000–1,500 for an older car before deciding how much of your savings the car itself can take.
The costs first-time buyers most often forget
- Insurance for a young or newly licensed driver can exceed the payment itself — get quotes before choosing the car, not after
- Tyres: a set for a mainstream car is a few hundred euros and they wear out on a schedule
- Registration, transfer fees and, in some countries, a roadworthiness inspection
- The first service after purchase, which is often overdue on used cars
- Winter tyres where they are legally or practically required
Turning a monthly figure back into a price
Once you have a sustainable monthly total, subtract insurance, fuel and a realistic repair and servicing allowance. What remains is what the car itself can cost per month. Multiply by how long you intend to keep it, and you have a purchase price that fits — usually lower than the one the finance calculator offered, and far less likely to become a problem.