How to budget for a luxury car
Owning a luxury car is everyone’s dream. Not only because of the status a luxury car brings but because of the comfort and ease you have when driving a luxury car. However, the problem with luxury cars is that they are quite on the pricey side and in today’s economic environment, it can leave a massive dent in your wallet. Which is why you’re wondering “can I afford that car?”. But fear not as there many ways which will make financing your car easy for you and your budget.
Creating a good budget is very important, especially when you are purchasing an item which is out of your budget. If you’re interested in sporting a fancy car but aren’t sure about how you can budget for it, then read these great tips below.
Have a bulletproof budget
The first thing you need to do is create a budget, more importantly, you need to make sure you stick to it. Sticking to a budget can help you make the right financial choices. Look at your monthly income and calculate how much you have left to spare. If you have any other bills you need to pay off like home loans or your children’s fees then avoid being impulsive and make sure you are financially stable enough to add another debt.
If not, you can always wait until some of your debts become low enough that you have money to spare. You should also cut out a few unnecessary costs from your budget such as eating take out and buying a coffee and be sure to check your monthly bank statement as that will assist you in distinguishing how your money is spent each month.
Save up for a deposit
In order for you to examine your car affordability, you need to save up for a deposit. Having a lump sum saved up can make the car payment much easier to tackle. Plus it’s easier for you to get pre-selected for vehicle finance from an authorised financial service provider if you have a deposit.
However, that isn’t the best part – when you have saved up some money you’re able to have lower monthly instalments because you already put down a down payment. There are many benefits which come with paying a down payment. For instance, you will pay an interest rate on a lower instalment and you will have a shorter repayment period on your loan amount which is ideal.
Figuring our repayments
Before you buy a car you need to consider the additional cost and how long you are prepared to pay for the vehicle. Registered credit providers in South Africa allow your loan term to be from 36 to 72 months so you can decide how long you want it to be.
You can also decide whether on not you’re interested in a balloon payment. A balloon payment is when a large amount of your car debt is a lump sum which you are able to settle or refinance at the end of your loan term.
Sell or trade in your vehicle
A great way for you to budget for the luxury car of your dreams is for you to trade in or sell your current car. That way you can use that amount and your savings allowing you to cover a large amount of the financing so that you can pay off the vehicle soon. Shop around and see what the trade value is for your vehicle and find a dealership or car buyer who is will to pay that amount.
New vs second-hand vehicle
A great way to purchase a luxury car is by going on the second-hand route. Not only will you have lower monthly payments but you can get a great deal and an affordable car. Some people still feel that second-hand cars aren’t worth it because it’s already been used by someone else.
But if you think of the amount of money you will be saving compared to purchasing a new vehicle you will soon realise that it’s a great deal. Nowadays, second-hand vehicles are in good quality and will last you a very long time. More importantly, cars depreciate in value within the first year, therefore, it’s a financially wise decision to purchase one which has already depreciated so that you won’t waste that money.
Think of additional car expenses
Cars are not cheap nor are the additional car expenses. So when you budget for the vehicle you need to think of the expenses such as car insurance and repairs.
The sad reality is that sometimes the unexpected happens – cars get stolen or break down, which is why it’s good to always be prepared financially for those problems.
Try and set up a saving account on the side for any additional expenses you would need to pay so that you can enjoy your new luxury car while still sticking to your good budget.