Buying a vehicle on a budget in Kingston, Ontario

Buying a vehicle is a difficult enough undertaking, from finding the right one for your lifestyle to deciding how you plan on paying for it. Luckily for you, we’ve put together a bit of a guide to help point you in the right direction when it comes to knowing how to purchase a vehicle. However, that task becomes even more difficult if you’re under budget constraints. So we figured we’d also share a bit of advice in regards to how to buy a vehicle on a budget.

How can you determine your vehicle budget?

How much can you afford to spend on a vehicle?

If you know you’re working within a budget there’s not a lot of use in looking at top-of-the-line luxury models, since you’ll just be disappointed at the end of the day. Your best bet is to determine an amount that makes sense for your lifestyle, then narrowing down the search from there. 

The 20-10 Rule

This all begins with your own personal budget, that you use for your day-to-day life. It’s important to have one when trying to determine what your vehicle budget would be. One common role is called the 20-10 guideline, which states you should never borrow more than 20% of your yearly income (net) and your monthly payments should be equal to or less than 10% of your monthly income (again, net). That 20% can be referred to as your safe debt load—the amount of money you can borrow over the course of the year.

First, to determine your net income just multiply your earnings over the course of a month, after taxes, by 12. So say you earn $1,000 a month after taxes, times 12 months, your net income is $12,000. Then, calculate 20% of your net income to find the max amount you should borrow (you can either multiply $12,000 by 0.2, or divide it by five). In this case, the max amount you should borrow—or, your debt load—is $2,400. It’s also important to remember that money going toward housing (i.e. a mortgage payment) should not be counted in that 20%.

Next, you’ll want to calculate 10% of your monthly net income. If we use the numbers above, and your monthly net earnings are $1,000, you can simply multiply that by 0.10 or divide it by 10—either way, the answer is $100.

Armed with this information, you know that you can spend roughly $100 a month on your vehicle for $1,200 on the year, which leaves you around $1,200 remaining in your safe debt load. Now, it might be tempting to throw all that on a vehicle down payment, but keep in mind that’s the safe amount of debt you can take on in an entire year. Putting down a larger down payment will certainly lower your monthly cost, but it’s good to keep in mind you might need that money for other things down the road. It’s also important to consider other costs associated with owning a vehicle, which we’ll go over below.

Other costs associated with your vehicle

It’s also important to keep in mind that your car payment isn’t the only cost associated with your vehicle. You should factor in operating expenses—at about a third of the monthly cost of your vehicle—into your budget as well. An easy way to do this is to take your vehicle budget and multiply it by 0.66. That way, the amount you budgeted above for a monthly payment will include all those extra costs related to vehicles that are easy to forget about. Those costs can include (but aren’t limited to):

• Insurance
• Regular maintenance (oil changes, check-ups, etc.)
• Parking (both out in public, as well as potentially renting garage space)
• Fuel
• Tires (having winter tires is an important part of living in Canada)
• Tickets

These are all costs you might not think about, so it’s very important to touch base with an insurance company before buying a vehicle. You can even receive quotes from several insurance companies on specific vehicles, ensuring you won’t be surprised by the cost of your insurance after you’ve bought your vehicle.

Choosing the right vehicle

We’ve touched on this before in our vehicle buying guide, but once you’ve determined your budget you need to determine what type of vehicle is right for your needs. Now, even if you’re buying on a budget, the team at Autohouse Kingston will be able to help you find a vehicle that fits both your needs and your budget. We have a great selection of vehicles at a variety of prices—meaning whether you’re looking for a jobsite-ready pickup truck, a three-row SUV for your family, or simply something smart, small, and reliable to keep your payments down, we can help. And of course, if there’s something you had your heart set on, we can always try to track it down for you. Simply give us a call or stop by our Kingston, Ontario dealership today to get the process started!