Start With Your Real Monthly Income

The first step in determining car affordability is understanding how much money you actually have available every month.

Use your reliable take-home income as the starting point rather than your gross salary. If your income changes from month to month, it is safer to work with a conservative figure rather than your best month.

Your income should then be compared with your regular household expenses, existing debt repayments and the expected costs of owning a vehicle.

Look Beyond the Monthly Instalment

One of the biggest mistakes people make when buying a car is looking only at the monthly finance instalment.

A car costs more than the finance repayment. Your budget should also allow for:

• Car insurance
• Fuel
• Vehicle maintenance
• Tyres
• Licensing costs
• Tracking costs where applicable
• Unexpected vehicle expenses

A repayment that looks affordable on its own may become uncomfortable once the complete cost of owning and operating the vehicle is included.

Before choosing a vehicle, calculate the total monthly cost of car ownership, not just the instalment.

Understand Car Finance Affordability Assessments

When you apply for credit, affordability is an important part of the assessment. Credit providers need to consider whether you have the financial means and prospects to repay the proposed credit.

This includes looking at your income, necessary living expenses and existing financial obligations.

The National Credit Act provides the legal framework for responsible credit practices in South Africa.

The Affordability Assessment Regulations also provide guidance on how affordability should be assessed.

This is why earning a certain salary does not automatically mean that you will qualify for a particular vehicle. Your complete financial position matters.

A Simple Car Affordability Example

Let’s look at a simple example.

Imagine your take-home income is R25,000 per month.

Your existing essential expenses and debt commitments total approximately R16,000.

That leaves you with approximately R9,000 before considering the running costs of your new vehicle.

A monthly vehicle repayment of R7,000 might initially appear possible because it is below the R9,000 available. However, once you add insurance, fuel, maintenance and other vehicle expenses, your remaining disposable income could become very limited.

This example demonstrates why looking only at the instalment can be misleading.

Choose the Car After You Know Your Budget

A smarter approach is to work backwards.

First determine what you can comfortably afford. Then look for vehicles that fall within that budget.

This can help you avoid falling in love with a vehicle first and then trying to force your finances to make the numbers work.

Your vehicle should fit into your financial plan rather than your entire financial plan being built around the vehicle.

What Should You Include in Your Car Budget?

Before deciding how much you can spend on a vehicle, consider your complete monthly financial picture.

• Housing costs
• Food and groceries
• Utilities
• Transport expenses
• Insurance
• Existing debt repayments
• School or family obligations
• Savings
• Emergency expenses
• Vehicle finance repayment
• Fuel and maintenance

Once these expenses have been considered, you will have a much clearer idea of what you can realistically allocate toward a vehicle.

Don’t Forget About Your Emergency Fund

Buying a car should not leave you with nothing in reserve.

Unexpected expenses can happen at any time. A vehicle may require new tyres, a service or an unexpected repair. Your household may also experience an emergency that has nothing to do with the car.

For this reason, it is important to consider your emergency savings when deciding how much money you can put toward a vehicle.

A car may be affordable on paper but financially stressful if you have no money left over for unexpected costs.

When Professional Vehicle-Finance Guidance Can Help

Choosing a vehicle and understanding your finance options can sometimes feel overwhelming, particularly if you are buying your first car or your financial circumstances are not straightforward.

A vehicle-finance consultant can help you understand the different finance routes available and match the vehicle search to your circumstances.

Cars Financed provides vehicle-finance consulting and assists customers with traditional vehicle finance, rent-to-own and cash-purchase options.

The aim should always be to find a vehicle and payment structure that makes sense for your circumstances rather than simply focusing on getting approved.

Useful Cars Financed Resources

If you are researching your options, these resources may also help:

• Cars Financed
• About Cars Financed
• How to Qualify for Car Finance in South Africa
• What Is Rent-to-Own Car Finance in South Africa?

Frequently Asked Questions

How much of my income should go toward a car?

There is no universal percentage that guarantees affordability. Your full budget, existing debt, living expenses and vehicle running costs matter more than relying on a single rule of thumb.

Can I afford a car if I already have other debt?

Possibly, but your existing financial obligations will form part of the affordability picture. Never hide debts or expenses on a vehicle-finance application.

Does getting approved mean I can comfortably afford the car?

Not necessarily. Approval means the credit provider has assessed your application against its own criteria. You should still check the complete monthly cost against your personal or household budget.

What costs should I consider besides my car repayment?

Consider insurance, fuel, maintenance, tyres, licensing and other ownership-related expenses. You should also maintain enough financial room for unexpected costs.

Should I choose my car before working out my budget?

It is generally better to determine your budget first and then choose a vehicle that fits within it. This can help prevent you from taking on a payment that puts unnecessary pressure on your finances.