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How to identify your car-buying budget

Buying a new car can be an exciting process, but it’s important to know what you can afford.

WesBank has provided details on how to look for a car that fits your current finances.

“Getting into debt by making purchases that stretch your budget beyond your means – whether it is a big-ticket item such as a vehicle or a pair of shoes – is not a responsible financial decision,” said the financial service provider.

WesBank cautions that graduates and young professionals in particular often overspend on their first cars.

“The priority for young graduates when purchasing a car should be that they are able to realistically afford it while ensuring that this additional asset does not compromise their financial situation,” says Kutlwano Mogatusi, WesBank Retail’s Communications Specialist.

“Instead, it should contribute positively to their new work lifestyle and sense of independence.”

How to calculate what you can afford

The general rule provided by WesBank is that you should not spend more than 20% of your gross monthly salary on vehicle repayments.

When it comes to applying for a vehicle finance scheme, the main factors that influence whether an application is successful are affordability and creditworthiness, according to WesBank.

Affordability refers to the discretionary income a person has left after monthly expenses are deducted, and it is this figure that should be used to assess whether you can afford the monthly payments on a new car.

Creditworthiness is how likely a person is to make their payments on time, which is determined by a credit history. A poor credit history increases the chances of an application being rejected.

It is important to note, however, that repayments are not the only expense that needs to be considered.

Fuel, maintenance, and insurance all play a factor as to whether or not a car is affordable on your current budget, too.


Car insurance is dependent on a number of factors, according to OUTsurance.

This includes:

  • Your age
  • Security factors
  • A good claims history
  • A healthy credit rating

The make and model of a car are also important.

While insurance can bring you peace of mind when on the road, it’s best to avoid claiming for every bump and scratch, said OUTsurance, as your monthly premiums will increase if you have claimed a lot in the past.

Credit history is much the same as it is when applying for a payment scheme, as a poor credit history may result in higher insurance premiums.

Regarding age, newer drivers typically pay more for insurance as a result of being less experienced. This is something for young adults to keep in mind when assessing what they can afford for their first car.

Finally, security factors refer to how and where the vehicle is commonly stored – usually an individual’s home and place of work – and constitute the risk of theft that the vehicle may be prone to.

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