What’s the most you should spend on a car?

By | 25th January 2017


I discovered Dave Ramsey’s rule for maximum vehicle spending some time ago – it’s an excellent guideline to use, as it can be used by anyone:

“Never own vehicles that have a total value that is more than 50% of your annual earnings”

Remember that this is a maximum, if you can meet all your requirements at a lower spend then that frees up funds for other areas.

It’s a great rule that is easy to apply, for example if you earn the UK average wage of £28,000 then the absolute maximum spend on all vehicles in total would be £14,000.

Many people in the UK are now leasing cars, but if you choose to do this then you could also easily apply this rule by looking at the list price of the new cars that you are considering leasing.

Remember that in many cases signing up for a lease means that you have to make all the payments for the full term, even if you have to hand the car back early, so it is best to avoid overcommitment.

Some worrying statistics from the UK:

Average UK salary 2016 £28,000

Average UK new car cost (August 2012) £28,970!

So in 2012 the average UK car cost more than 100% of the average annual salary, four years later, in 2016.

After building up 17 years experience in industry and practice, James started his own business from scratch in 2006. He now helps others to do the same, while minimising both the risks and costs. James is dual qualified in tax and accounts, and has won multiple awards for small business. In 2014 he was invited to Downing Street, as one of the Small Business Saturday 100 winners.

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