Sunday, June 23, 2024

Is Buying A Car The Right Move For You Financially?

In the UK, vehicle use has decreased by around 60% in the past few years, even though there are around 32 million licensed cars in the country. These stats perhaps show that young people are not too interested in buying cars due to the costs and reliability of the vehicles on the market. Regardless of your age or financial position, buying a vehicle is never a straightforward proposition as there are countless considerations that must be given due diligence before making such a big financial commitment.

The Budget Factor

The most important consideration when buying a vehicle is your personal budget. Many people end up spending most of their annual earnings on a car that is disproportionate to the salary that they are earning. There lies no embarrassment in buying what you can afford as everyone must start somewhere. Spending unreasonably is one of the biggest reasons for young adult poverty in the UK. In contrast, spending sensibly and budgeting properly on all expenses and asset purchases is a great way to ensure financial freedom in the future, while still obtaining the assets you absolutely need. Many experts in the automotive industry suggest that you should save or spend 10-15% of your annual income on a vehicle. Obviously the longer you save, the more money you’ll have to spend.

Weighing Up The Running Costs

Next, you need to research the different cars in your price range and determine what the running costs of each specific model will be. This is extremely important as many people don’t do this research and end up spending far more on fuel, maintenance, and insurance than they were originally planning.

Buying a car is not a once-off, lump-sum payment. Instead, you will be spending money on the vehicle for years to come. Check the difference in prices between diesel and petrol options, check up on service reports to determine if there is any mechanical damage, and make sure that the tires of the vehicle you are purchasing are in good condition.

Determining Depreciation

Lastly, it is important to remember that cars are depreciating assets. This is a major consideration when buying a new car as the minute you drive it off the lot, it drops in value. Unless you’re buying a sought-after vintage model from the 1960s it’s highly likely that your vehicle will become more valuable as the years go by. If this is not really a problem for you, then perhaps buying a used car would be your best option.

Is It Worth It?

This question can only be answered on a case by case basis. For some people on an extremely tight budget, purchasing even a used car may not be a good option. But for those earning a higher salary with a greater degree of financial freedom, a car might be exactly what they need to boost work performance and quality of life. Whichever category you fall into, the crux of the matter is the same. Do your homework before you sign on the dotted line. 

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