How Much Do You Need to Earn in Order to Afford a New Car?

Buying a new car is an exciting milestone, but it comes with important financial considerations. Whether you’re eyeing a sleek Subaru Forester or a practical, budget-friendly compact car, determining the income needed for a car purchase is essential. Understanding your income requirements, expenses, and the various financing options available will help guide you to the right decision. We’re here to demystify the process, making car ownership more attainable for all.

Understanding Car Affordability

Determining car affordability and the income needed for a car purchase involves evaluating several key factors, starting with your income, which sets the baseline for what you can afford. Ongoing expenses, such as rent, groceries, and bills, further reduce the portion of your budget available for a car. Additionally, your savings play a crucial role, as a higher down payment can lower the overall loan amount and reduce monthly payments. Lastly, your credit score significantly impacts the interest rates you’re offered, which in turn affects the total cost of the loan and your ability to afford the vehicle.

How do lenders assess car loan eligibility based on income requirements?

Lenders evaluate your car affordability and income needed for car purchase by considering:

• Debt-to-Income Ratio: How much of your income is already committed to debt repayments?
• Credit History: A strong history of repayments gives you access to better loan terms.
• Employment Stability: Consistent employment shows lenders you can reliably meet monthly payments.

Calculating the Budget for Your New Car: Car Affordability and Income Requirements

How Much of Your Income Should Go Toward a Car Payment?

A common rule to follow is the 20/4/10 rule:

• 20% down payment: Aim to put down 20% of the car’s total price.
• 4-year loan term: Keep your loan term short to save on interest.
• 10% of your income: Don’t let your monthly car payment exceed 10% of your gross monthly income.

Example:

If you earn R30,000 per month, 10% of your income needed for a car purchase would be R3,000. This is the maximum amount you should allocate for your car payment, excluding additional costs like insurance, fuel, and maintenance.

When considering the costs of owning a car, it’s important to look beyond just the monthly payment. Insurance premiums, which are based on your car model and driving history, can significantly add to the overall cost. Maintenance and repairs, including routine services and unexpected expenses like tyre replacements, should also be factored in. Fuel costs depend on how often and how far you drive, which can vary greatly depending on your lifestyle. Additionally, taxes and fees, such as registration fees and other administrative costs, contribute to the overall expenses of car ownership.

Subaru Models: Affordable New Cars

Why Choose Subaru?

Subaru is renowned for its commitment to safety, with features like the EyeSight Driver Assist Technology offering cutting-edge protection on the road. The brand also excels in technology, equipping its vehicles with advanced infotainment systems and innovative driving features that enhance the overall driving experience. Additionally, Subaru’s reputation for durability ensures that its cars are built to last, providing long-term reliability and value for owners.

Which Subaru Models Are the Most Affordable?

• Subaru Impreza: Affordable and dependable, it’s a great fit for urban drivers.
• Subaru Crosstrek: This compact SUV offers versatility for both city life and weekend getaways.
• Subaru Forester: Known for space, safety, and technology, the Forester is great for families.

Financing Options for Buying a New Car

What Are the Different Types of Car Loans?

• Secured vs. Unsecured Loans: Secured loans offer better interest rates but require collateral.
• Fixed vs. Variable Interest Rates: Fixed rates give you consistent payments, while variable rates can fluctuate.
• Balloon Payment Options: Lower monthly payments, but a larger final payment at the end of the loan.

To get the best car loan rates, focus on improving your credit score by paying down debt and making timely payments. Shop around for competitive offers and consider a co-signer to increase your chances of securing a better deal. When deciding between paying upfront or financing, paying upfront avoids interest but ties up cash, while financing spreads payments but increases overall costs due to interest. Weighing these options will help you choose the best financial path.

Practical Tips for Affording a New Car

How to Save Money When Buying a New Car?

• Negotiate the Price: Always negotiate for the best deal.
• Look for Promotions and Discounts: Subaru often runs promotions on new models.
• Consider Trade-In Options: Trading in your current car can reduce the cost of your new one.

Deciding whether to buy a new car now or wait depends on market conditions and future prospects. If prices or interest rates are high, it may be better to wait. Watching for upcoming Subaru models and deals could offer better value with new features or promotions. Balancing these factors will help you make a smart choice.

Frequently Asked Questions (FAQs)

1. Which Subaru cars can I afford with my salary?
   Your choice depends on your monthly income and the size of your loan. A Subaru Impreza or Crosstrek may be a good option for moderate incomes, while the Forester suits higher budgets.
2. Which new car has the cheapest monthly payment?
   A compact car or sedan like the Subaru Impreza generally has the lowest monthly payments due to its affordability.
3. How much do you need to earn to buy a car?
   It’s recommended that your car payment does not exceed 10% of your gross monthly income. If your income is R30,000, a monthly car payment of R3,000 or less is ideal.
4. How much should I earn to afford a brand-new car in South Africa?
   To afford a new car, you typically need a gross income of at least R15,000–R25,000, depending on the car model and your other financial obligations.
5. When to make full payment for a new car?
   Paying in full upfront can save you from paying interest. However, financing is a good option if you prefer to spread the cost over several years.

By evaluating your car affordability and income needed for a car purchase, you can make a well-informed decision that aligns with your financial situation and vehicle preferences. Whether you opt for a Subaru Forester, Crosstrek, or Impreza, Subaru has a model that fits your needs and lifestyle.