Having a car gives you a huge sense of independence. It’s great to be able to get in the car and head off somewhere for the weekend, or simply offer your friends a ride to your morning classes. Having a first car as a student is a landmark for some and it’s an exciting purchase.
How much you should spend on your first car completely depends on you as an individual. It depends on your cash flow, how much and how you’ll use your car and how easily you can pay back any money that you borrow.
Generally, it wouldn’t be advisable to spend more than $10,000 on a first car as a student – especially if it’s going to be parked on the road and only used for short trips. Take a look at the useful tips below to see what will work best for you:
How Will You Use Your Car?
It’s easy to get swept away with the thoughts of your first car, however it’s also good to ask yourself a few key questions before you start to think about spending what could be a substantial amount of money. Have a think about some of the following things:
– How often will you use your car?
– What sort of distances will you be driving your car?
– Where will you be able to store your car?
– What is your expected lifespan for this car?
If you do want your first car to be an investment that you’ll have for years to come, look carefully at the mileage that any second-hand car options have done. Ideally you want a car with the lowest mileage possible – especially if you are considering driving it long distances or using it for a long time.
Working on Your Credit History
Once you’ve thought about how you’ll use your car, it’s good to think about your finances as a whole. You’re at a crucial stage when you’re just beginning to really build up your credit history.
Borrowing money is fine, however, you’ll need to know for certain that you will be able to make all repayments required in a timely manner to avoid defaulting and potentially jeopardising your credit history.
So, think about how much you have to put towards a down payment for your car, then think about whether you want to borrow any money to fund it. Remember, it’s essential that you only borrow what you can pay back.
Budgeting for Your Car
When thinking about how much you should spend on your first car, it’s really important to think about your current situation.
Most students don’t have a huge amount of spare cash lying around so you’ll need to make sure you have enough that you won’t be putting yourself under financial strain.
– Have a look at your monthly incoming and outgoing expenses and see what you can feasibly put towards a first car.
– Remember that cars come with associated costs such as insurance, fuel, warranties and unexpected repairs.
– If you do decide to borrow money, work out exactly how much you can pay back per month and work out which date this will be done by.
Taking a Loan or Buying Outright
It’s entirely up to you whether you borrow money to buy your first car or whether you try to pay for it outright. It’ll also depend on the type of car that you want – if it’s GOT to be something smart and fast then you’ll probably have to take out a loan.
If you’re happy with a second-hand car that just gets you from A to B, then you may be able to manage it outright. Saving up money to buy your first car is something that a lot of students do – whether it’s taking on a few extra shifts each week or cutting down on expensive hobbies!
Generally, as a student you have several other debts – perhaps including loans for tuition and accommodation – ask yourself whether you can feasibly take on another loan.
If not, it may be worth going for a cheaper second-hand car that you can either buy outright or make a larger down payment on. Keep yourself debt-free wherever possible at this stage in your financial career.
