Paying more than you can afford for a new car? Here’s how you can tell
Motorists are spending a bigger percentage of their income on new cars than they can afford, a new study has found.
On average, we’re paying £1,154.37 more than we can reasonably afford to pay, affordability tests show.
The research, carried out by short-term car lease providers, Cars on Demand, quizzed 2,500 car buyers and compared what they had spent with what experts calculate we can afford.
How much of your income should you spend?
Experts estimate that no one should be paying more than between 20 and 25% of their annual income on a car – this takes into account all other normal outgoings, such as rent, energy bills and groceries.
But the results found, on average, that motorists were paying 27.5%, which is equivalent to £1,154.37.
Motorists in Northern Ireland were the most spendthrift, blowing almost 39% of their income on cars and equivalent to an overspend of £3,429.59
And in only one region, The West Midlands, did new car buyers spend less than what the experts said people should budget. They shell out just over 22% of their income – that’s an underspend of £38.37.
The study also found that one third of us admit to being driven by our emotions to overspend.
42% of owners said they had spent so much on their car, they couldn’t afford to pay for any unexpected repairs.
Overspending by region (source: Cars on Demand)
And when it comes to splashing out the most, Northern Ireland is the most indulgent region. They spend a whopping 38.8% of their annual salary on a new car, which is on average £3,429.59 more than what they should spend.
Financing the deal
While most of us overspend, it seems, at least we seem to be taking the financing of our new car purchases seriously.
The survey found that on average we spend 45 minutes looking at various options to finance a car, rather than just grabbing the first one offered.
ASpokesmanSaid consumer expert Nic McBride commented, “That 45 minute figure is quite reassuring. Overspending on the price of a car is one thing, but getting the wrong finance package can really hurt your wallet.
“It ALWAYS makes sense to shop around and work out what you’ll be paying and at what rate.”
If you’re looking for a loan, try our simple-to-use comparison tool.
LOYALTY DOESN'T PAY
A Spokesman Said offers price comparison in energy, insurance and broadband that could save you hundreds.