How Much Should You Spend on a Used Car?
How Much Should You Spend on a Used Car?
The right amount to spend on a used car is the amount that gives you a suitable and dependable vehicle without placing your wider finances under unnecessary pressure.
There is no single figure that will work for every buyer. Your budget will depend on your income, existing financial commitments, available savings and how you plan to use the car. The cost of owning the vehicle is also important, as the purchase price or monthly finance payment represents only part of what you will spend.
Before viewing used cars, work out what you can afford to pay upfront or each month. You should then account for insurance, vehicle tax, fuel or charging, servicing and general maintenance. This gives you a more realistic budget and helps prevent a car that appears affordable from becoming difficult to run.
Is There a Recommended Amount to Spend on a Used Car?
You may come across general rules suggesting that a car should cost no more than a certain percentage of your annual income or monthly salary. These can provide a rough starting point, but they do not reflect every household’s circumstances.
Two people earning the same amount may have very different levels of disposable income. One may have a mortgage and other financial commitments, while the other has lower monthly costs. They may also use their cars differently.
Someone travelling a few miles around Grimsby and Cleethorpes may have different requirements from a driver covering long motorway distances every week. Family size, annual mileage, luggage space and access to home charging can also influence which vehicles are suitable.
A personal budget based on your actual income and spending will usually be more useful than a fixed percentage.
Should Your Budget Be Based on the Purchase Price or the Total Cost?
Your budget should consider the total cost of owning and running the vehicle. A used car with a lower advertised price may cost more over time if it has a high insurance premium or uses considerably more fuel. A more expensive vehicle may also stretch the budget once finance interest and day-to-day running costs are included.
Your expected costs may include:
- The purchase price or monthly finance payment
- Insurance
- Vehicle tax
- Fuel or electricity
- Servicing and MOT tests
- Tyres, brakes and other wear-related maintenance
- Parking charges or permits where applicable
- Breakdown cover and warranty costs if they are not included
When setting a budget, MoneyHelper recommends taking into account everyday running costs in addition to the cost of buying or leasing a car because they can have a significant effect on affordability. Its guide to the cost of running a car provides further guidance.
How Much Should You Spend When Buying a Used Car Outright?
If you plan to buy a car outright, decide how much of your savings you can comfortably use while keeping enough money available for other commitments and unexpected expenses.
Spending every pound of your available savings on the car can leave little room for insurance, vehicle tax or future maintenance. Even a carefully prepared used vehicle will require routine servicing and the replacement of wear-related components during ownership.
It can therefore be sensible to separate your available money into two amounts: the amount you are willing to spend on the vehicle and the money you will retain as a financial reserve.
You should also consider the value of your current vehicle. Selling it or using it as a part exchange may increase the amount available without requiring you to use more of your savings.
Select Vehicle Sales by CARS of Grimsby provides free, no-obligation valuations for customers who are considering selling or part exchanging their current car or van.
How Much Can You Afford to Pay Each Month for a Used Car?
When using finance, begin with the amount you can comfortably afford each month after your essential household costs and existing credit commitments have been paid.
Leave room for changes in your circumstances and the ongoing cost of running the car. A monthly payment may appear to be manageable on its own, but the combined cost of the payment, insurance, tax and fuel could place greater pressure on your finances.
The length of the agreement also needs to be taken into consideration. Extending the term can reduce the monthly payment, although it will usually increase the amount of interest paid overall.
How Do Running Costs Affect Your Used Car Budget?
Running costs can vary considerably between vehicles of a similar purchase price. Before choosing a car, obtain an insurance quotation using the exact registration where possible. Check the vehicle tax rather than assuming a newer, smaller or electric car will be treated in a particular way. Tax rules and rates can change, and the amount may depend on the vehicle’s age, emissions and original list price. You can use the official DVLA vehicle information service to check details including the current tax rate, engine size, fuel type and emissions.
Fuel economy or electric range should be considered in relation to the journeys you make. A highly efficient car may justify a higher purchase price for someone covering substantial annual mileage. The saving may be much smaller for a driver making occasional short journeys.
Servicing costs can also differ by make, model, age and engine type. Tyre size, parts availability and technical complexity may influence future maintenance bills.
Should You Buy the Cheapest Used Car That Meets Your Needs?
The cheapest suitable-looking car will not always provide the lowest overall cost of ownership. Condition, maintenance history and preparation can be more important than a small difference in the advertised price. A poorly maintained vehicle may need tyres, brakes or overdue servicing soon after purchase and this can quickly reduce the initial saving.
Compare vehicles on a like-for-like basis. Consider the age, mileage, specification, service record and MOT history. You should also examine what the dealer includes within the price.
A vehicle supplied with recent servicing, a suitable warranty and a full MOT may offer better overall value than a lower-priced alternative where those items need to be arranged separately.
How Do You Decide Which Features Are Worth Paying For?
Start by separating the features you require from those you would simply prefer. Your essential requirements might include a certain number of seats, sufficient boot space, an automatic gearbox or enough towing capacity. You may also need a vehicle that can accommodate a child seat, mobility equipment or tools for work.
Preferred features could include heated seats, a panoramic roof, upgraded audio or a particular colour. These may improve your enjoyment of the car, although they should remain secondary if including them pushes the vehicle past your comfortable budget.
Safety equipment and features that benefit and enhance daily use may justify additional spending. Parking sensors could be particularly valuable for a driver regularly using tight spaces, while cruise control may be more useful for frequent motorway journeys.
A list of requirements will make it easier to compare vehicles and avoid paying more for equipment you are unlikely to use.
How Much Should You Allow for Maintenance After Buying a Used Car?
The amount will depend on the vehicle’s age, mileage and condition. All cars require ongoing maintenance, including vehicles that have been carefully inspected before sale.
Tyres, brake pads, bulbs and windscreen wipers wear through normal use. Older vehicles may also require more frequent attention as components age.
Review the service schedule and ask what maintenance has recently been completed. The MOT history can also identify recurring advisory items, although an MOT should not be treated as a replacement for a detailed assessment of the car.
Every vehicle sold by Select Vehicle Sales by CARS of Grimsby comes with:
- A full service
- A clean 12-month MOT
- A six-month RAC Approved warranty
- Twelve months of complimentary RAC Breakdown cover
Warranty upgrades to 12, 24 or 36 months are also available. Terms, eligibility and exclusions apply, so customers should review the relevant warranty documentation.
Read more about what RAC Approved Dealer status means for customers.
Can Spending More on a Used Car Save Money Later?
Paying more can sometimes provide access to a newer vehicle, lower mileage or a more complete service record. It may also allow you to choose a model with lower running costs.
The higher price should still be supported by the vehicle’s condition, history and suitability. A newer registration or higher specification does not automatically make one car a better purchase than another.
Focus on value across the expected ownership period. If you plan to keep the car for several years, condition and maintenance history may carry more weight than short-term savings. If your needs are likely to change soon, tying up a larger amount of money in the vehicle may be less appropriate.
A good used car should fit your life and remain affordable after the initial excitement of buying it has passed.
Frequently Asked Questions About Used Car Budgets
What is a sensible budget for a first used car?
A sensible first-car budget should cover a suitable vehicle while leaving enough money for insurance and routine running costs. Insurance can be a significant expense for a new driver, so obtain quotations for specific vehicles before deciding what you can afford to buy.
Should I use all my savings to buy a better car?
Keeping some savings available can help with insurance, tax and unexpected expenses. The appropriate reserve will depend on your wider financial circumstances and access to other emergency funds.
Is it better to pay cash or use car finance?
Cash avoids finance interest and monthly repayments whereby finance allows you to spread the cost. Compare the total amount payable and consider which option fits your financial circumstances.
What is the most important figure on a car finance quotation?
The monthly payment is important for day-to-day affordability, while the total amount payable shows what the agreement will cost over its full term. The APR, deposit, fees and any final payment should also be reviewed.
Should I choose a newer car with higher mileage or an older car with lower mileage?
Neither option is automatically better. Consider how the vehicle has been used, maintained and prepared. Service history and present condition can provide more useful information than age or mileage viewed separately.
How can I avoid spending too much on a used car?
Set your total budget before visiting dealerships. Include running costs and decide which features are essential. Compare the overall value of suitable vehicles and avoid increasing your limit solely because a more expensive car becomes available.
Find a Used Car That Suits Your Needs and Budget
The amount you should spend on a used car depends on what you can afford and what you need the vehicle to do. A realistic budget should account for the purchase or finance cost alongside the expense of running and maintaining the car.
At Select Vehicle Sales by CARS of Grimsby, our team will take the time to understand what you are looking for and help you consider suitable vehicles within your preferred budget.
Each vehicle is assessed individually and prepared by a team with extensive experience in accident repair and vehicle condition. You can ask questions, review the available information and take a test drive before making your decision.
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