How do you know when you can afford a car?

Firstly, if you are asking that question you can’t afford a new one.

There are two things to consider.

  1. Do you have money to pay for it or reliable cash flow to service a loan? Whilst you may be able to afford to buy it, it still doesn’t mean you should.
  2. What else could you do with the money and how useful would that money be in the future if you had more of it?

A good compromise would be to find a car you like and how much it would cost; and then half the price and try and find something you will like in that price bracket.

A shiny piece of metal is nice, but it’s not life changing. Making bad financial choices is however.

Hope that helps.

I’ve written previously about car purchases in Forget the Fiat. Own a Ferrari.

This question and answer originally appeared at Quora.

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Mark Underdown

Financial Planner, Small Acorn Money

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