How Much Can I Afford Per Month?

May 19, 2025

Finance Guides

A Step-by-Step Guide to Planning Your Car Finance Budget

Buying a new or used car is a big decision — and one of the most important questions to ask is:“How much can I comfortably afford to spend each month?”

At Sandicliffe, we believe in making car finance simple, transparent, and tailored to your lifestyle. Whether you're considering a Personal Contract Purchase (PCP), Hire Purchase (HP), or a personal loan, this guide will walk you through how to work out your monthly budget before applying for car finance.

Step 1: Know Your Net Monthly Income

Start by calculating your take-home pay (your income after tax and deductions). This includes:

Your salary or wages
Bonuses or commission (if regular)
Benefits or support payments
Any consistent secondary income (e.g. freelance work, rental income)

💡 Tip: If your income fluctuates, take an average over the last 3–6 months for a more accurate picture.

Step 2: List Your Monthly Expenses

Now it’s time to understand your outgoings. Create a list of your regular monthly expenses, including:

Housing: Rent or mortgage payments
Utilities: Gas, electric, water, broadband, mobile phone
Living costs: Food, toiletries, entertainment, gym memberships
Transport: Fuel, train or bus fares, parking fees
Financial commitments: Credit cards, loans, subscriptions
Childcare or education: Nursery, school fees, clubs

Subtract these expenses from your income to see how much you have left each month — this is your disposable income.

Step 3: Apply the 20/10 Rule

A widely used guideline is the 20/10 rule:

Spend no more than 20% of your monthly income on your car (including finance, insurance, fuel, tax, and maintenance)

Keep 10% of your annual income as your total car loan limit (if borrowing)

📊 Example: If you take home £2,500 per month, try to keep your total car-related spending under £500/month. That ensures your budget stays flexible and healthy.

Step 4: Consider Car Running Costs

Owning a car isn’t just about the monthly finance payment. You’ll also need to budget for:

Fuel or electricity for EVs
Insurance premiums
MOT and servicing
Repairs or tyre replacements
Road tax (if applicable)

At Sandicliffe, we offer transparent advice and can help estimate these costs based on the model you're considering.

Step 5: Explore Different Finance Plans

Your monthly payment will depend on:

The car’s price
Your deposit amount
The loan or agreement term (e.g. 36 or 48 months)
The interest rate based on your credit score and chosen lender

There are several types of car finance:

PCP: Lower monthly payments with a final balloon payment if you want to keep the car
HP: Higher monthly payments but you own the car at the end
Personal loan: Own the car outright from day one, repaying the lender directly

📲 Try our Sandicliffe Finance Tool to see example quotes instantly based on your budget.

Step 6: Decide on a Deposit

While some finance deals are available with zero deposit, putting down a larger deposit can:

Lower your monthly repayments
Reduce the amount of interest you pay
Improve your chance of approval
Many Sandicliffe customers choose to trade in their current car to boost their deposit. You can get an instant valuation using our Car Valuation Tool.

Step 7: Check Affordability — Honestly

Ask yourself:

Can I still cover my essentials and save money each month?
What happens if my income drops temporarily — can I still afford this car?
Do I have enough emergency savings?

It’s better to choose a car you can comfortably afford, rather than stretch your budget too tightly.

Step 8: Get Pre-Approved and Speak to a Specialist

Once you’ve worked out your budget, speak to one of our Sandicliffe finance specialists. We’ll help you:

Get pre-approved with no pressure
Compare different finance offers
Tailor a plan that suits your lifestyle and future plans

Final Thoughts: Take the Guesswork Out of Car Finance

Understanding how much you can afford per month is the first — and smartest — step toward financing your next vehicle. At Sandicliffe, we’re here to help you every step of the way.