Buying a car is exciting… but for many, it’s also one of the largest and often unexpected expenses of the year. On Financial Awareness Day, let's take a real look at what car ownership costs beyond just the monthly payment, and help you figure out if you're truly ready for it.
👉 What's the average UK salary in 2025?
👉 Quick rules of thumb before you shop
👉 Monthly car repayments by salary
👉 Step-by-step affordability checklist
👉 Why Marsh Finance presents affordability this way
👉 Buy with confidence, not just excitement
Owning a car typically costs UK drivers £3,350 annually for running expenses alone: fuel, insurance, maintenance, road tax and more.
Add depreciation and loan interest and that can more than double, especially if you’re financing the car.
A study shows that 2 in 5 drivers spend nearly 20% of their monthly income just on their vehicle. That’s a big slice of your take-home pay that could be going to savings, holidays, or peace of mind.
To be real about car affordability, it's helpful to know what people are generally earning. According to the Office for National Statistics, as of early 2025, the average weekly earnings in Great Britain, including bonuses, are around £722, while regular pay (excluding bonuses) stands at about £671.
Multiply that out, and it means:
A good rule of thumb for affordability is to keep your monthly car finance payment under 10% of your take-home pay. When you include all car costs (insurance, fuel, tax, maintenance), try to stay under 20%. This helps you enjoy your car without eating into savings or struggling with unexpected bills.
Here’s what that might look like in real life for different salaries in the UK:
|
Annual Salary (Gross) |
Approx. Monthly Take-Home Pay |
Max Monthly Finance Payment (10%) |
Max All-In Car Budget (20%) |
|
£20,000 |
£1,450 |
£145 |
£290 |
|
£25,000 |
£1,750 |
£175 |
£350 |
|
£30,000 |
£2,050 |
£205 |
£410 |
|
£40,000 |
£2,650 |
£265 |
£530 |
|
£50,000 |
£3,250 |
£325 |
£650 |
Figures based on UK 2025 average tax rates. “Take-home pay” is after tax and National Insurance.
It’s easy to be tempted by cars that push you to 15% or even 20% of your take-home pay just for the finance payment, but that leaves little room for insurance hikes, fuel price spikes, or unexpected repairs.
By sticking to the 10% rule, you give yourself breathing space and avoid being “car poor” — where most of your disposable income vanishes into your vehicle.
If you earn £30,000 a year, your take-home pay is roughly £2,050 a month. Following the 10% rule, your car finance payment should be no more than £205 a month. That might sound low, but it’s realistic, especially if you buy used or extend your loan term slightly (without overpaying interest).
Total Cost Snapshot: What Are You Committing To?
Let’s break down typical yearly costs for a financed car in the UK:
|
Cost Type |
Estimated Annual Cost |
|
Running Costs (fuel, insurance, repairs) |
£3,350 startingroup.co.uk |
|
Depreciation |
£1,200–£1,600 Marsh FinanceWikipedia |
|
Finance Interest (4-year PCP) |
Varies – check your rate |
|
Total Estimated Annual Cost |
£5,000–£6,000+ |
Owning a financed car often costs more than double the advertised monthly payment.
Determine your take-home pay (after tax). If it’s £2,000/month, aim for a car budget under £200/month or £400/month all-in.
2. Estimate Monthly Recurring Costs
Breakdown:
Check out our blog on the True Cost of Car Ownership
3. Add Depreciation
Cars lose 15–20% of their value in the first year, then around 10–15% annually. That’s a real cost, think of it as “money evaporating” that you’ll never recoup.
4. Factor in Finance Interest
If you’re budgeting by monthly instalments, check if you’re also saving for final balloon payments or extra interest on long-term loans.
5. Review Hidden/Extra Expenses
6. Total Your Monthly and Annual Outgoings
If the total exceeds 20% of your net income, pause and reconsider.
We don’t just care whether you get approved for finance, we’re here so you can stay approved throughout the loan without ending up “car broke.” We look at how much you can honestly afford, based on your income, budget, and cost of living, not just your credit score.
If you need help modelling your numbers or want to explore cars that truly fit your budget, check out our guides on:
A new car may be thrilling, but being financially prepared gives you the freedom to enjoy it without regret.