How to Manage your Budget when Taking Out a Car Loan

Getting a car loan is one of the biggest investments you can make. However, with a good budgeting plan, you can make it work for your needs and save money on your auto insurance premiums at the same time.

Use a car loan calculator

One of the best ways to work out how much you can afford to spend on a car is by using an online calculator. It will help you budget and ensure that you don’t go over your limit.

Once you’ve figured out what your maximum payment would be, take a good look at your budget and see where you can make cuts. This could be through cutting down on socialising or other expenses.

Make a checklist

Next, it’s important to make a checklist of all of the features that your dream car, and ideal car loan, will have. It will help you work out how much you can afford to spend on a car. You might like to divide these items on the checklist into ‘must haves’ and ‘would be nice’ items. The ‘must haves’ are things that you can’t compromise, while the other column are things you might be able to live without in order to achieve more manageable monthly payments.

Check whether the monthly payments are affordable

When buying a car, the monthly payments are often the largest bill you will have. To keep your financial picture in mind, take out all of your other debts before finalising your new car purchase. This will help you get on top of your finances before buying a car.

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If you already have a car loan, and you’re looking to refinance, check whether the repayments will be more manageable than what you’re used to.

Compare interest rates and fees

Before taking out the loan, compare interest rates and fees of different lenders in order to get a better deal. You’ll also want to check on the lender’s reputation. This will ensure that your car loan doesn’t turn into a financial nightmare.

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Get as many quotes as you can to ensure that you’re not paying more than you need to. It’s important to always read and understand what you are signing so there aren’t any nasty surprises further down the track! Check out Driva to easily compare multiple interest rates available between lenders personalised to you.

Budget for ongoing costs

In addition to the car loan, there are a number of other ongoing costs you’ll need to budget for.

Insurance is likely to be one of the biggest additional expenses you will have to pay, so it’s important to plan ahead. Look at what other people are paying in monthly premiums for the same type of vehicle, and factor this expense into your budget.

Other ongoing expenses will likely include petrol, registration, maintenance, road side assistance and toll road costs.

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