When trying to determine just how affordable a car is in the current economic climate, it’s fair to say that much will depend on your precise financial circumstances.
There are also a number of variable but universal factors that must be taken into consideration, including the real-time, macroeconomic climate and the type of car that you want to invest your money in.
In this article, we’ll explore this in further detail while offering some practical advice on how to determine your budget and operate within its limits.
Inflation vs. Wage Growth – Appraising the Cost of Living
Before you look to buy a car, you need to consider the wider economic climate and ask how this impacts on pricing and the underlying value of the pound.
If we look at the recent climate, for example, we see that British citizens have effectively seen their first real pay rise in 12 months. This means that average wage growth in the UK has finally superseded the rate of inflation, with the former peaking at 2.8% in April and the latter falling to 2.7% during the same period.
Not only does this curtail a falling standard of living, but it also makes the notion of buying a car far more affordable. With inflation set to fall further in the months ahead, it’s important that you track the macroeconomic climate and identify the best window in which to buy your vehicle.
2.Considering Your Own Financial Circumstances
Of course, a decline in the cost of living means little if your own financial circumstances are strained, so the next step is to measure your existing income against the amount that you pay-out on a monthly basis.
This will provide you with a clear insight into your monthly disposable income, while also helping you to calculate how much money you’ll be able to save over a predetermined period of time.
By measuring this against any financial savings that you already hold, you can develop a true understanding of your circumstances and the value of the vehicle that you can realistically afford. This may also help you to choose between buying a new or used car, which represents a significant stage in the process as a whole.
3.Cash, Finance or Loans? Determine a Method of Purchase
At this stage, you’ll have a clear understanding of your budget and the ideal time to complete your purchase. However, you’ll need to use this information to determine the precise method of purchase that you use, as you consider the benefits of cash, financing or a car loan.
If you follow the financing route, it’s crucial that you take on monthly repayments that are easily affordable within your budget. For those with the requisite amount in savings, a cash purchase may be preferred as this minimises the cycle of debt and negates the deployment of interest payments.
If you have a poor credit score, you may also want to consider the type of specialist car loans available through service providers such as Likely Loans. This type of firm can offer access to a range of competitive loans and interest rates, while also serving as a viable funding option if you’re ineligible for finance.