Easy Ways To Budget For A Vehicle Instalment

WesBank

Offsite Content

14/12/2021

Have you been thinking about getting your new set of wheels and wondering how you will be able to finance them? Or maybe you have had your car for a bit and are finding it difficult to figure out how your budget works, and all these unexpected car expenses aren’t making it easy for you. Worry not. In this article, we will take a look at how you can budget for your vehicle instalment and ways you can make extra money to be able to maintain your new, or old-ish, pride and joy. 

First, Budget Way Before 

A lot of car owners will tell you that they had to save up a considerable amount of money before purchasing their car. This is because a lot of people like making a large deposit on their cars so that the monthly instalments are a lot less and they do not take forever to pay off their cars. So, consider setting up a savings account that you will not have access to until you are ready to buy your car. These are called “fixed accounts”, and you can set up a debit order that will have you depositing into your fixed account every month. A 10% deposit would be a minimum, but if you can save more, it lowers your monthly premiums, so consider that. You can even have your bank block you from accessing the money. It is very easy to do. 

Calculate And Make Considerations 

A lot of graduates often look forward to buying their first car. Due to low or no credit score, this may seem like a pipeline dream. However, there are things such as graduate finance that helps graduates finance their cars with affordable monthly instalments. You can calculate what you qualify for and what your premiums will be and then work out your budget from there. Remember, always go for a car that will not cost more than 25% of your income as your money needs to cover your other living expenses too. You can work out your payments and affordability with these calculator features on your car finance or car dealership apps and websites. It’s pretty easy. When using a banking app, you can input your income and expenses, as well as the amount you want to loan, and the app or website will generate a monthly instalment you will be paying. With apps like the WesBank app, you can input your loan amount, the duration you want to take for your payment, and it will let you know how much it’ll cost. Most times, you will get a sense of your expected costs for car finance, so you prepare well. 

Stay Ready And Budget For Car-Related Expenses

According to finance gurus NerdWallet, you should follow the 50/30/20 budget, which allocates 50% of your monthly income to needs, 30% to wants and 20% to savings and debt repayment. Deciding whether to factor vehicle savings into the "needs" or "wants" part of your budget can be tricky, but think of it this way: A used, base-model car and a brand-new one with upgraded features will both get you to work, but the latter is more of a "want." Keep in mind that your car payment and other ongoing costs, such as insurance, will become a part of your budget. Many experts say that all car-related expenses shouldn't exceed 20% of your take-home pay. Factors such as your driving record, age and credit score will influence your insurance premiums. Compare car insurance rates from multiple insurers and consider bundling your auto policy with homeowners or renters policies to save money.

Speaking Of Insurance 

You can insure your car together with your household items and other assets under one insurance company and profile. This will save you money as your premiums will be less when you cover almost all your belongings with one insurer. Consider using apps that show you how much insurance premiums you may have to pay if you go with certain insurers, compare quotes and make a decision better for you and your budget. Your future self will thank you for it. 

Use Your Car For Business, Too 

While your car is your pride and joy, you can come up with ways to ensure you earn an extra income without damaging your precious. A pro-tip would be to consider a delivery or e-hailing service in order to earn an extra income specifically to pay for the car. Famous finance expert Robert Kiyosaki says that you should always try to find some kind of job or project that will be dedicated to paying or financing a certain need. So, if you use your car to deliver, then use that money to pay for the car. This way, your primary income doesn't feel the burn too much. 

Final Words 

Owning a car, especially in South Africa, is more a convenience than a luxury. Our public transport system can only do so much, and the price of travelling is also felt by many people. Buying a car always feels like a better solution, and we couldn’t agree more. Always explore your options between buying, paying cash or saving up a large deposit, balloon payments, and so much more. There is a piece of information waiting for you and a lot of finance experts and car dealership experts waiting to help you.