When you come to finance your next car, it’s important to try and work out exactly how much you can afford to spend on it each month and budget accordingly. A car payment is just one piece of the puzzle, so factor in other expenses too.
As a general rule of thumb, car experts tend to advise that you should aim to spend no more than 10% of your take-home monthly pay on your car payment alone. This is a good starting point, but remember it doesn’t take everything into account.
Here’s a more comprehensive approach to consider car affordability based on salary:
- Total Debt-to-Income Ratio (DTI): Ideally, your total car payment (including principal, interest, insurance, and gas) shouldn’t push your DTI ratio above 50%. This ratio considers all your monthly debt payments divided by your gross monthly income.
- Loan Term: Stretching out your loan term lowers the monthly payment but increases the total interest you’ll pay. Choose a loan term that fits your budget and goals.
- Down Payment: Putting down a larger down payment reduces your loan amount and lowers your monthly payment.
Of course, these figures are merely recommendations and personal preference has to be taken into account. Maybe you’re saving for a house or have other financial goals – adjust your budget accordingly.
We’ve used these factors to pick out some great car options for different salary ranges. Take a look at what you can afford below!
Remember, this is just a starting point. It’s always best to do your own research and factor in your specific circumstances before you finance a car.
The Best Cars for Around £150 Per Month
These are some of the cars you can afford if you earn roughly £20,000 a year:
Fiat 500
The Fiat 500 has revolutionised the city car. It’s small and stylish with plenty of Italian charm to woo you over inside and out. It’s also comfortable to drive and very economically friendly with an average of 38 mpg and providing lots of space for your passengers including generous boot space big enough to fit three suitcases.
With a small but nifty engine on offer, it’s is a perfect car for diving in and out of traffic in the city. It’s no surprise that you see so many of them on the road because of their reliability and quirkiness.
Citroen C1
A chic, fun and affordable car, the Citroen C1 is a great choice for your money. With an updated engine, this French city car has more motorway cruising ability compared to older models meaning a more comfortable long-distance ride. Small and eco-friendly with low CO2 emissions, the C1 is arguably one of the best city cars on the market. A perfect car for the city dweller.
Toyota Aygo
The Toyota Aygo has been around for a while but don’t let this fool you into thinking that it’s an outdated model, the Aygo is just as good as it was in 2005. Offering an updated version of the 1.0-litre engine, it still handles perfectly on the road and down country lanes. Small and fun to drive, the Toyota Aygo is a perfect car for dodging in and out of traffic whilst saving you money on petrol.
The Best Cars for Around £200 Per Month
These are some of the cars you can afford if you earn roughly £30,000 a year:
Ford Focus
The Ford Focus has lead the way for a traditional family hatchback for many years and it’s easy to see why. Sitting comfortably in the middle of its family, the Ford Focus offers more space than its sibling the Ford Fiesta whilst still following the same chassis style and replicating the classic interior of the Ford Mondeo. Offering a smooth ride for drivers and passengers and excellent handling abilities, the classic Ford Focus offers a more sophisticated feel than its sportier and edgier counterpart, the Ford Focus ST.
It’s not a surprise that the Ford Focus will continue to dominate the family hatchback market for years to come.
Nissan Juke
Nissan has moved quite comfortably into the world of SUV especially with the Nissan Juke. Offering sporty handling and excellent cornering the Nissan Juke has all the capabilities of an off-road vehicle within the body of a city car. A smaller boot in comparison with the much larger Nissan Qashqai, it still offers plenty of space to transport your family on holiday without feeling cramped in between luggage. The Nissan Juke has since been welcomed into the world of SUV and has left its mark.
SEAT Ibiza
The Seat Ibiza has been around for a long time with the latest addition being the fifth generation of Ibiza. Considered one of the biggest rivals to the Ford Fiesta, Vauxhall Corsa and Renault Clio, the SEAT Ibiza has come a long way since its introduction in 1984. Providing a comfortable ride for short and long journeys and it settles well on the motorway offering you support and precision throughout your journey. With composed and sophisticated handling, the SEAT Ibiza is an excellent choice for everyone from families to city dwellers.
The Best Cars for Around £300 Per Month
These are some of the cars you can afford if you earn roughly £40,000 a year:
Audi A1
The Audi A1 is one of the most affordable Audi’s on the market but it doesn’t let this compromise the style and quality of the exterior and interior. Offering modern technology including LED headlights as standard and additional extras including front parking sensors and a rear-view camera. All models are fitted with a complimentary Sat Nav helping you get from A to B in comfort.
Mercedes-Benz A-Class
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When Mercedes-Benz announced the A-Class a few years ago, people underestimated its success, however it is one of the best selling Mercedes available on the market. It has excellent ride quality for driver and passengers alike accompanied by visually impressive cabins ensure you have a pleasurable experience. Making light work of inner-city traffic and long motorway jaunts, the Mercedes-Benz A-Class is an excellent and exciting family car.
Jaguar XE
Jaguars junior saloon looks and feels great to drive which is why it’s a great choice for everyone. Offering a 2.0-litre engine in Diesel and Petrol, the Jaguar XE offers a smooth, comfortable and spacious ride. You can choose from a variety of additions including the head-up display, which beams information on to your windscreen and all models include as standard front and back parking sensors. The Jaguar XE is an excellent choice for those who are looking to spend a bit more a month.
The Best Cars for Around £500 Per Month
These are some of the cars you can afford if you earning over £50,000 a year:
BMW X3
The BMW X3 series is a car that you can navigate around suburbia or drive for a long time on the M1. Offering a smooth and comfortable ride on bumpy roads, it also remains calm at faster speeds. It comes fitted with deep windows allowing you an all around view and front and back parking sensors as well as a rear view camera that allows you to park comfortably and safely. The BMW X3 is a top competitor of the classic Land Rover Discovery and it’s easy to see why.
Land Rover Discovery
Everyone has heard of a Land Rover Discovery. It’s the most well-known 4×4 as it can drive on almost any surfaces. With the ability to carry up to seven people, it’s the perfect choice for a family. Since entering the SUV scene in 1989 it has dominated the market with heritage and class. The Land Rover Discovery is perfect for those who wish to travel to their destination in leisure. With all models being fitted with front and rear parking sensors and a reversing camera as standard, you can park this slightly larger car with ease. If you wanted something that shouts luxury and style then the Land Rover Discovery is a perfect choice.
Ford Mustang
You can usually hear a Ford Mustang coming from a mile away, but this is part of its legacy. A retro car with modern touches, the Ford Mustang has been welcomed into British culture and has become one of the most stylish cars on the market. The engine roars like the animal it’s named after whilst offering a comfortable and fun drive. The Mustang would still struggle to be called a family car despite having a bigger boot than its rivals. What it lacks in space, it makes up for in fun, the Mustang is truly a muscle car and designed for those looking for a fun to drive car.
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