How Much Car Finance Can You Apply For?

How much should I borrow for a car loan?

How much car finance you can apply for depends on a variety of factors ranging from your regular income to the amount you have for a deposit or down payment. You should also think about your current expenses as well as your past credit history – so there's a lot to consider.

A (too) simple formula

In some cases, you can try using the 20/4/10 rule.

• 20 – you should make a down payment of at least 20% on your car
• 4 – you should finance the car for no more than 4 years
• 10 – don’t let your monthly vehicle expense exceed 10% of your income

This might make things seem easy, but we understand that each case is different and we want to help you understand how much car finance you can apply for. Some people may have a larger or smaller deposit, some people may need a longer loan term – don’t panic, we have access to a range of lenders and can help find the right car loan for you.

Be prepared

When figuring out how much you want to borrow for your car loan, it’s important to be prepared for covering all the costs of your car.

A great way to do this is to do some simple budgeting. Have a think about all of your monthly outgoings – this should include everything from grocery bills to childcare costs. Now consider your income and how much you have left over once everything else has been paid.

Never stretch yourself financially - it’s far more damaging to agree to car finance that you can’t repay than to simply wait a few months and get yourself in a better position.

You’ll also want to request a copy of your credit record – this is easy to do and finding out your credit score is free. Knowing this in advance will be helpful as most lenders will look at this when deciding how much car finance you can be approved for. We can help you get started with a free credit check.

Estimate your repayments

Use our car loan calculator to make things a whole lot simpler. Once you’ve decided which vehicle you are looking to buy, you simply need to input the following information for the repayments to be estimated for you:

• Vehicle purchase price
• Loan deposit
• Balloon payment
• Loan term
• New or used car
• Vehicle purpose
• Credit score

Having an idea about how much you can expect your repayments to be will help you to get a realistic idea of how much car finance you can apply for, based on what you can afford to pay back each month without placing yourself under financial strain.

Other costs to be aware of

If you’re asking yourself “How much should I borrow for a car loan?”, you need to remember that you’re not just going to be making repayments on your car loan and drawing a line under the expenses for that month.

Remember that running a car costs money each month in addition to paying back the loan. Costs include:

• Insurance
• Repair and maintenance
• Fuel

If you only budget for paying back your car loan, you will be left with these as additional costs, which often mount up.

Ask for expert advice

By using our handy car loan repayment calculator, you can get a quick and simple idea of how much car finance you can apply for and feasibly pay back easily.

However, car finance can be overwhelming for some people, so if you’re uncertain about anything, don’t hesitate to contact us and get some expert advice and access the wide range of lenders who we work with. Find out how we can help you get the right car loan for you.