Churchill magazine

Setting a budget before buying a used car

Updated on: 23 September 2020

Before you go looking for a car, make sure you know your budget.

Is it time to pick up your piggy bank and shake out the silver to find out what your used car budget really is? Because if you don’t know how much you can afford from the get-go, it will certainly all end in tears.

In the long term borrowing money ends up costing you money because of interest charges. Ideally you need to calculate a sum which not only goes towards the purchase, but also a weekly allowance that means you can afford to run the car.

Get calculating

  • The logic is simple; how much do you want to spend?

  • How much do you have saved?

  • If there is a shortfall, then think again, or borrow.

  • If there is a surplus, this can go towards your running costs.

Once you have decided to spend a certain amount on the car, write it down in ink.

As you will know or soon discover, the big problem when buying a car is that you can get carried away and end up spending more than you budgeted for. It could be a persuasive salesman or your own weakness when your heart overrules your head.

If you need to borrow

Compare any finance arrangement fees and penalties that could be imposed for any reason, including settling early. What you want to know is the total cost of borrowing the money by comparing what the cost of the car would have been outright and what you will have paid overall at the end of the agreement.

So the golden rule is to borrow the least amount over the shortest period and always find out what the total cost of the loan will be at the end of the repayment period. 

Running costs

You must never forget about these. Just standing still your car will be costing you money in fixed costs that you will have to pay.


Ignore this important matter until the last minute and it could be something that a car dealer will be happy to organise, at a price! It’s easy to organise online.


Estimate your annual mileage, then find the overall fuel consumption figure for your future car online or in a magazine.

Divide the annual mileage by the fuel consumption figure, then multiply by the cost of fuel, then divide this figure by 12 or 52 to arrive at a monthly or weekly figure.


Phone up a garage and ask what an annual service will cost and you may have interim repairs and costs like the odd tyre, so allow for that too.

Road tax

Don’t forget that you need to pay for that disc in the corner of your screen

Depreciation: Unless you buy a banger for a few hundred pounds, a car will fall in value every single month.

Some car magazines publish these figures, but the simplest way is to look in a value guide and see how much the selling price of the model has fallen in a year and factor that into your costs

Once you have all these figures you can now estimate whether you can afford not to just buy the car you want, but also run it on a day-to-day basis.

Whatever car you go for, see how much you could save with Churchill, go online today and get a car insurance quote.    

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