Making sure you can get on the road in a new car without upsetting the monthly household budget can feel like a difficult balancing act. There are so many pressures on our finances at these uncertain times, but we all need to be able to get from A to B in a way that’s safe, reliable, and cost-effective.
To make sure that you find the right solution for you and your family, we’re going to talk you through everything you need to know.
Start with reliable, repeat income from your salary or regular customers if you’re self-employed, and then start to deduct household costs. Your rent/mortgage, council tax, utilities, and any loans or debts have to be paid. You then take off your groceries, fuel, and other incidentals.
What’s left can be split between a new car lease, emergency funds for home repairs, and savings for things like holidays and home improvements. If in doubt, be pessimistic rather than optimistic with how much money you will have left over so that you’re not causing yourself undue stress by stretching things too far.
Low monthly payments are understandably what will first catch your eye, but there’s more to it than that. Add in the insurance, the fuel, the maintenance and servicing if they’re not bundled in, road tax, parking charges for your commute to work, and charging if it’s an EV. By knowing the full cost of the lease, you can make sure that you don’t put too much money towards the monthly payment side of things.
Deposits can be lower when leasing than when buying a car with traditional finance, but a little care and attention is still needed at this stage. Make sure that the deposit won’t eat too far into your savings so that you still have your emergency fund. You never know when you will need it, so taking a little extra time when signing up for a new deal is really important.
A good estimate is to take an average of your last three years. Few of us will remember these details, but the mileage elapsed since the last MOT 12 months ago will be recorded on the test certificate. If you have copies to hand, you can quickly work out your three-year average by using these figures. Just make sure to adjust for any changes in behaviour, such as a longer commute, more frequent holidays, or the cost of new hobbies you’re now pursuing.
There are pros and cons to every type of vehicle finance, which is why it can really help to compare like-for-like vehicles across different types of plans. Seeing whether a leased vehicle will be more cost-effective than buying outright becomes simple when you make a direct comparison and check out the numbers. Asking an experienced leasing company and car dealership to help you compare the two approaches will save you time and energy if you’re unsure about how to do it yourself.
It’s easy to write a budget today by assuming that everything will go well tomorrow, but we all know that a spanner will be thrown into the works sooner rather than later. Test it in a spreadsheet for things like food costs spiking by 30% or energy bills doubling over the course of a year. This is a great way of showing whether you have left enough headroom in the budget. Take a moment to remind yourself just how volatile the prices of things like food and fuel have been since 2020, and you will see that this is a crucial step you cannot afford to skip.
Take a look at these car leasing special offers and then have an honest conversation with yourself that is based on the numbers you have arrived at by working through the previous steps on this list. The last thing that you want to do is go for the most expensive car you can possibly afford, only for something else in life to go wrong and apply pressure to your household budget the very next day.
By being realistic, aware that prices of other goods and services will change, and remembering the importance of headroom, you will be able to strike the right balance.
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