I turned 30 a couple of weeks ago, and in an effort to reward myself for making it. I decided to buy myself a car as a present.

This time round, I wanted to be a little smarter with my purchase decision. Instead of just setting myself a spend limit on the purchase price, I wanted to consider the entire picture of affordability – really analysing my regular vehicle expenses.

What I used to do

I imagine the way I used to figure out what car I could afford was very much like how everyone else does it:

Total savings in the bank – debt commitments + trade-in value for existing car = Total room to spend

However this isn’t the full picture, especially in today’s world of high petrol and insurance prices. I could do much better.

Getting a full picture

The first thing I did was to analyse my current costs for the car. This was really easy via looking at my “Car” category of spending in Pocketbook.

I figured spending for parking and speeding fines would still remain, however, petrol and insurance may change depending on the car I purchase. Perhaps registration fees would too if I got a newer car.

So looking at Pocketbook, I was able to see that I spent $1,400 for comprehensive insurance and around $35 a week for petrol in the part year. That’s over $3,000 for the year.

Then the first thing I did to figure out what I could afford is to gather similar information for my shortlisted cars. There are plenty of online car insurance quote websites and fuel economy information was easy from websites such as Redbook. I used this information to set up data sets for all my options.

Using this information, I soon figured out the car I really wanted – a 2010 Volkswagen Polo GTI – was able to to save me around $1,300 a year! That’s spending $750 for comprehensive cover and $20 a week for petrol. This made going over my original budget really easy, especially as the numbers told me I’d be making up most of the difference in that first year.

Getting exactly what I wanted

My lesson here was by really studying my historical spending habits, I was better informed to make the right big purchase decision. What I got out of it was exactly the car I wanted, which originally I thought I couldn’t afford at all.

So how much are you paying for car insurance and fuel? Can you save more with a different car? Find out with Pocketbook

Bosco

PS. Another tip to hack is to overdraft on your home loan at substantially lower interest rates for the purchase, rather than take out other forms of financing.