What car can you afford?

By Mozo ·

When considering purchasing a car, the matter of what you can afford is a huge question. First off, you need to determine whether or not you plan to buy the car outright. And if you plan to get a loan, how much money you are willing to sacrifice towards repayments. 

While you may be able to roughly work out affordability at first glance, it takes a little more effort than that. To truly understand how much of your salary you should be dedicating to a car loan, you must take a fine-tooth comb through your finances.

Want to start comparing loans? Look below. 

Car Loan Comparison Table - last updated November 21, 2020

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I want to borrow


  • mozo-experts-choice-2021

    4.67% p.a.

    5.22% p.a.based on $30,000
    over 5 years

    Terms from 3 to 5 years. Representative example: a 5 year $30,000 loan at 4.67% would cost $34,096.76 including fees.

  • 4.89% p.a.

    5.53% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,377.58 including fees.

  • 4.89% p.a.to 8.89% p.a.

    5.44% p.a.to 9.46% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 4.89% would cost $34,276.58 including fees.

  • 5.19% p.a.to 18.95% p.a.

    5.46% p.a.to 19.26% p.a.based on $30,000
    over 5 years

    Terms from 3 to 7 years. Representative example: a 5 year $30,000 loan at 5.19% would cost $34,320.13 including fees.

  • 5.50% p.a.

    5.85% p.a.based on $30,000
    over 5 years

    Terms from 1 to 7 years. Representative example: a 5 year $30,000 loan at 5.50% would cost $34,632.09 including fees.


How much do I really have available to spend? 

Have you ever tallied up all the little expenses you make to paint the bigger picture of what your finances look like? You may be surprised what your regular and occasional spending amount to. 

So, where should I start? 

What you need to do is print out 2 - 3 months worth of bank and credit card statements and make an honest observation. From hair and beauty, petrol, rent, mortgage, school fees, dinner parties and more, you will soon be able to properly garner how much you spend and save each payment cycle. 

The important part is finding where you can make some adjustments. Imagine if you brought in your lunch to work every second day, dyed your own hair at home every second month or did your own facials every now and then. Before you know it your savings would grow and your affordability to buy the car you want has shot right up. 

Try Mozo’s budgeting calculator to help with the number crunching.

The forgotten costs of car ownership 

Figuring out how much you can afford to spend on a car is more than working out the price of the vehicle itself. Instead, you need to consider the ongoing costs of owning the car and weave this into your budget. 

Here are some things to keep in mind: 

  • Servicing: Often, buyers forget to consider annual service costs for their vehicle. If they're incredibly costly, you can take your car in for a service at an alternative mechanic, as long as they're registered and reputable, and record the service in the log book that comes with your car. 
  • On-road costs: this is where you pay the stamp duty on your car (plus luxury car tax if you’re that way inclined). Stamp duty is calculated on the price of the car, so the less your car costs, the less your stamp duty, vica versa. Sometimes these on-road costs include CTP insurance as a package deal. Ask before you leave with your car so that you're absolutely certain that you’re absolutely covered. 
  • Application fees: some dealers will add an application cost into the price of your car, even when they say the application cost is ‘free’, others will charge anywhere from $250 and above. But will this be the contending factor on the car you choose in the end? Or will you accept any application fee that comes with your car? Ask around at different dealers first so that you have a figure to compare. 
  • Car insurance: got your CTP? Great! Now, for an additional insurance that’s not compulsory, but you should really consider getting it. You may be an experienced driver of twenty years or even a P plater, but one thing you you’ve got to keep in mind is that accidents can happen, no matter who you are or how many years' experience driving you’ve had. So before driving away with your new set of wheels, make a quick phone call or purchase insurance online to secure your policy asap. If you’ve got your rego paper and pink slip sorted, you’ll be driving off in no time. 
  • Car loan late fees: can you afford to keep paying penalty fees? This could be anywhere between a few dollars up to about $50 each time you miss a payment. Arrange an automatic payment to avoid this unnecessary cost asap. If your income tends to go in your account late from time to time, ask your lender to change the due date or arrange an overdraft to sit in your account to cover your car repayment while you’re waiting for your pay to go in. But don’t spend it on other stuff! You don’t want to spiral deeper into debt. It’s to save you from being charged hefty late fees, not to mention keeping your all-important credit history intact. 

Top tips for paying off a loan 

Just by following one or two of these tips you could end upsaving hundreds, if not thousands on your car loan in the long run. Check them out below!  

  • Only borrow what you need - all other things being equal, the bigger your loan amount, the more interest you'll wind up paying. There's a big difference between the interest you might pay on a $10,000 car loan and what you'll pay for a $50,000 loan. So decide what price tag your budget can realistically handle and use that to work out how much to borrow, instead of the other way around.
  • Extra cash - work bonus? Tax refund? Well you know where they could go?! Yep, you guessed it, toward you car loan. A chunky amount will make all the difference to what you owe in the long run, shaving months off your loan and interest which equals $$ in your pocket.
  • Round-up your repayment amount - sure it’s a bit obvious and one that most people ignore, but just by rounding up your repayment by $20 - $50 each month could shave many months to a year. Think of the interest you’ll be saving. 
  • Pay regular increments - ok, so this may be dependent on how you get paid from work, if you get paid weekly or fortnightly instead of monthly, arrange to repay your car loan when you get paid from work. This way the amount you pay will seem smaller and you may be tempted even to transfer a little more toward your loan, paying it off faster.

Just by spending a little time comparing different companies and their prices, you could save hundreds of dollars a year. Use Mozo’s car insurance comparison tool to see where you stand. 

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