What Car Can You Afford? - A Guide to Car Buying

What Car Can You Afford? - A Guide to Car Buying

Written by DriveAxis.ca November 16, 2022

Buying a car is no small feat. For many, it’s the second-most expensive purchase next to a house. Therefore, it’s important that car buyers identify what kind of vehicle is within their price range, and that often necessitates looking at other factors besides the sticker on the window at the dealership.

Understanding the costs associated with a car can help you determine what price range you should stick to, in order to keep from taking on too great a burden. Thankfully, today’s cars are loaded with premium features and technology - even the inexpensive ones. There’s a vehicle for everyone, so follow along to learn all the things you need to take into account before choosing your car.


This is the first and most obvious thing to watch out for. If the sticker price of a car is too high, you may need to look at another option. Of course, there’s always a bit of room for savvy buyers to haggle down the price and score a deal, but some people might be pushing their budget to the extreme, for no good reason.

It’s also tempting to go slightly beyond your budget, as well. You may have $15,000 dollars set aside for a new car, but that $18,000 hot rod parked next to it may be a tempting choice. Of course, the final decision is up to the buyer, but if you’ve already budgeted out your maximum allowance for a car, you should refrain from making excuses as to why you should break it.


Different car brands come with different maintenance requirements, as well as differing costs of parts. For that reason, you should do your homework before settling on a particular brand. The prices of two cars from two different brands might be neck-and-neck, but one may require parts that cost a lot of money if replacements are necessary.

If budget is an issue, it’s far better to go with a similarly priced car from a brand known to have relatively modest parts and maintenance costs. Otherwise, you may be caught in a precarious financial predicament if a particularly expensive part decides to die after the warranty period has expired.


Every car needs to run on something, whether it’s diesel, gasoline, or electric charge. When choosing your vehicle, you’ll need to be aware of this going in. Choosing an electric vehicle will eliminate the need to visit the gas station every week, but the upfront costs for all that technology will be far higher, even with government rebates to fall back on.

For those determined to stick to a gas-powered vehicle, be aware of what gasoline grade is required by the engine. Most cars take Regular gas, which in itself is quite costly these days. Other brands, such as luxury sedans and certain sports coupes require Premium gasoline, which can exact a hefty toll on your wallet every month.


You might have your perfect dream car locked in your sights, but have you thought about insurance costs? Depending on where you live, your driving history, age, and the make and model of your desired car, your insurance rates will fluctuate greatly. If you’re a relatively young driver, or one with a less-than-stellar driving record, you may find insurance costs too prohibitive, especially if you live in a busy metropolis like Toronto.

If possible, try to figure out what vehicle you want before you go car shopping. Online resources make it easier than ever to browse hundreds of cars, and learn their details before making a purchase. Narrow it down to a few, and then shop around for insurance quotes, so you know what you’re getting into. The more ancillary costs you can account for beforehand, the easier it’ll be to secure the final sale on your car.


Leasing and financing both have their pros and cons, but most will say that the latter option is preferable. For one, you will own your car once it’s paid off, whereas a lease requires you to surrender the car after your lease term is up. You also have far more freedom to do what you want with a financed car, whereas leased vehicles come with a laundry list of requirements attached.

Many younger and more inexperienced drivers tend to lease, since it only requires them to pay a percentage of the car’s total value. When the lease term is up, they may choose to lease another vehicle and repeat the cycle. Since the monthly payments tend to be far lower than financing, this is a good option for those who need some financial elbow room. However, the cost of leasing vehicles over an extended period of time will add up, which means you’ll be paying more in the long run. Always check the leasing and financing interest rates before making a decision on either, and keep that calculator close at all times.

THE 20/4/10 RULE

After taking all of the above into account, you still may not be certain what car you can afford to buy. Thankfully, there’s a really great method to help narrow down your choices. RateHub.ca devised a formula for every car buyer to follow, which will help you determine which car is best for you.

It’s called the 20/4/10 rule, aptly named because it breaks down the purchase of a car based on three separate criteria. 20% of the car’s value should be applied as a downpayment on the day of purchase, while 4 stands for the maximum number of years you should maintain a car loan. This is done so as to cut down on the amount of interest you’ll be paying. While it may be tempting to take a 5, 6, or even 7-year loan, it will add up to thousands of lost dollars over time.

Finally, the 10% stands for the amount of your monthly car payment, as dedicated from your total monthly income. Some may stretch this to 15%, but 10% is a generally good rule to follow. By staying within this figure, you’ll have 90% of your income left over for mortgage or rent, plus utilities, food, and other costs.

This formula is rigid, but it’s done so for a reason - to keep you from paying too much for your car, while forcing you to stick within a particular budget. By analyzing the formula above, you can apply it to your car of choice, and find out if it works. Otherwise, you may need to shop around for another vehicle that will match the formula’s criteria. It’s not a rule, but it’s an excellent guide for those who want to avoid unpleasant financial surprises in the future.


Of course, there’s an even easier way to determine what car you can afford, and that’s to let the experts help you. DriveAxis.ca has thousands of quality pre-owned vehicles that can fit your budget, whatever it may be. We can work with you to determine which vehicle is best for you, without breaking your bank, or your sanity.

Contact us today for more information. Our in-house financing system means we can approve anyone, regardless of their credit score or history, in just a few easy steps. In fact, we’re so confident in our financing department that we will give $1000 dollars to anyone who doesn’t get an approval - no questions asked. What are you waiting for?

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