Saving money means making good choices on the two main expenses in your life: your car and your home. It doesn’t matter if you never splurge on anything else – If you pay more than you should for either of these, you might find yourself strapped for cash in other places.
So – how much should you spend on your second hand car? It is, of course, completely up to you, and depends on variables such as your lifestyle, outgoings, income etc. As much as we would love the all-knowing, all-seeing, forever-wise finance fairy to appear and make all our financial decisions for us with a puff of glittery dust – alas, we must trust our own judgement. We have though, tried to assist your decision by including a very loose, top level spending guide below, some of which is according to MoneyUnder30.
Here at Carrickmacross Credit Union Ltd., we could advise you that you could afford €400 per month for a car loan, based on your monthly income, but it’s up to you how long you spend paying off that loan – which is the deciding factor between a newish BMW or a mid-range Ford Focus. Our staff will chat to each individual person about their needs and ability to repay, so if you have a query, don’t hesitate to drop in and see us, or submit a query online.
So, here are some options to consider:
- The general option: spend 35% of income on your car
This is more of a catch-all approach. As it is a significant chunk of your income, it might be preferable to be making average or above average wage, and have a capacity to repay over a longer period, if you were to take out a loan.
- The wiser/frugal option: spend 10% of your income on a car
This will be based on life choices, but spending 10% of your income on a car would be the wise choice – and you may still get a car with acceptable mileage for €2,000-€3,000, based on an average income.
- The popular option: spend 20% of your income on a car
According to car site Edmund.com, 20% of your wage is their ‘rule of thumb.’ when it comes to spending on a car. This percentage has to include all of the expenses that come with a car as well – so take this into account when planning how long you have to budget/pay back your loan.
That’s all great, but let’s say I have €7,000 to spend on my car, what do I look out for when spending my money?
In terms of what to know what to invest this money in, just make sure to go for a level up from basic and prioritise the following three things:
- Car Mileage
At around 3 years old, or 30k-40k kilometres, this is the first major milestone in the lifetime of a car. The second major milestone is 60-70k kilometres and is the time you may need to replace parts on a car, and the third is 100,000 kilometres. Check how many miles the car has done, and ascertain how much the car is at each stage. What mileage level you decide on will depend on how far you will drive the car on a weekly basis. You can check a car’s history on sites such as cartell.ie or motorcheck.ie.
- Car Colour
If you’re hoping to resell the car, make sure it’s black, blue, silver or grey.
- Manual gear box
Apparently, according to Ford, 95% of Irish people would prefer manual over automatic, so better for re-sale.
If you’ve decided on the amount you’d like to spend, and need a little assistance, we’d be more than happy to chat to help you figure out the best finance plan for you.
Loans are subject to approval. Terms & Conditions apply. Carrickmacross Credit Union is regulated by the Central Bank of Ireland.