Buying a car is a big decision – and having a solid budget in place can make the entire process less stressful. Whether you’re applying for your first loan or upgrading your vehicle, knowing how to budget for a car loan is key to staying in control of your finances.
Here’s how to plan ahead so your car loan fits comfortably into your lifestyle.
1. Know What You Can Afford to Borrow
Start by looking at your monthly income and expenses. How much room do you realistically have to take on new repayments?
As a guide, most lenders recommend that your total loan repayments (including any credit cards or personal loans) shouldn’t exceed around 30% of your income.
It’s also important to consider your full financial picture – not just the car loan itself. Budget for fuel, insurance, rego, servicing and any unexpected costs.
2. Use a Car Loan Calculator
Once you know how much you can comfortably repay, use a car loan calculator to explore what different loan amounts and terms might look like.
You can adjust the loan amount, repayment frequency, and loan term to see how each change affects your repayments. It’s a quick way to understand what’s realistic for your budget.
3. Factor in Upfront and Ongoing Costs
If you’re buying from a dealership or private seller, remember to factor in upfront expenses like stamp duty, insurance, and registration. These are costs you may need to pay before you even drive the car home.
Ongoing costs like fuel, servicing and tolls should also be included in your budget to make sure your car remains affordable month to month.
4. Consider Your Deposit (if any)
While some lenders offer no-deposit loans, having a deposit saved up can reduce the amount you need to borrow – which in turn lowers your repayments and the interest you’ll pay over time.
If you’re unable to save a deposit, lenders like Finance One may still be able to help with flexible options that suit your situation.
5. Choose the Right Loan Term
A longer loan term can reduce your monthly repayments – but you may end up paying more interest overall. A shorter term means higher repayments, but you’ll own the car outright sooner and save on interest.
Find the balance that works best for your budget and lifestyle.
6. Don’t Forget Your Credit History
Your credit history can impact your loan options, interest rate, and repayment amount. If your credit score isn’t perfect, you may still qualify for a loan with Finance One.
We specialise in helping Australians with bad credit car loans and take the time to understand your unique circumstances.
Final Thoughts
Budgeting for a car loan isn’t just about choosing a nice vehicle – it’s about making sure the repayments work for you long-term. By planning ahead, using the right tools, and being realistic about what you can afford, you can drive away with confidence.
Want to see what your repayments could look like? Try our car loan calculator or explore our flexible vehicle finance options.
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.
