Which Car is Best for a Low Budget?

23 Jun 2025

Which Car is Best for a Low Budget?

Buying a car is one of the biggest financial decisions most of us make. With so many finance options and cars on the market, one of the most common questions people ask is: which car is best for a low budget?

The answer depends on your lifestyle, but generally, smaller hatchbacks and compact cars tend to be the most budget-friendly. These cars are often cheaper to buy, more economical to run, and may be easier to finance. 

What Are the Most Popular Low-Budget Cars?

If you’re trying to keep costs down, but you still want a reliable motor to get you from A to B, you might want to consider either a new or used model of the following cars:

Dacia Sandero: A spacious family-sized hatchback, this is one of the cheapest new cars in the UK. It boasts a pretty spacious boot and offers good fuel economy.

Kia Picanto: Slightly more expensive than other options, but it’s affordable to run and compact, making it perfect for city driving. A bonus is the great handling, making it easy to manoeuvre and park.

Hyundai i10: This is a similar car to the Kia Picanto in that it’s quite small yet reliable, but the Hyundai i10 is considered to offer a more comfortable and quieter driving experience.

Toyota Aygo X: A stylish option that’s perfect for city driving. Generally, this car is affordable to finance and cheap to insure, depending on your personal circumstances. 

Ford Fiesta: Hugely popular, thanks to its renowned reliability and availability on the market. This is a good used car option to keep your costs as low as possible.

What Is the Cheapest Car to Pay for Monthly?

The answer to this question really depends on your personal circumstances. Usually, smaller, used cars will offer more affordable monthly payments. However, other factors like the car’s age and your finance deal can have an impact on your monthly payments. 

It’s important to find a deal that works for you, not just to focus on finding the cheapest car. You might want to consider keeping your total monthly car costs (this includes finance, fuel, tax and insurance) to under 15% of your net income. This could help to keep your budget flexible for life’s other surprises. 

What’s the Cheapest You Can Pay for a Car?

This is another question without a clear-cut answer. If a car is for sale at a price that seems too good to be true, it probably is! The important thing is to look at car finance based on affordability rather than just chasing the lowest number that you see. The price you pay may change depending on your credit score, your finance terms and length, and the car itself.

You should always consider whether the payments are comfortable for you month-to-month. Get an idea of what’s realistic for your budget with our car finance affordability calculator tool.

How Can I Lower My Car Payments?

Even with a budget-friendly car, the monthly cost is something most people are most interested in. There are a few things that usually make the biggest difference in your monthly payments:

• Finance type - different agreements work in different ways. For instance, a Personal Contract Purchase may often give you lower monthly payments, but your initial deposit is usually bigger. We go into more detail about the different types of car finance in our blog.

• Deposit - generally, a larger initial deposit usually brings your monthly payments down as it means you’re borrowing less overall.

• Term length - the length of time you need to pay back your loan could also have an impact on your monthly payments. For example, spreading the cost over a longer period could mean lower monthly costs (but potentially more interest).

• Car type - if you’re going for a more flashy model, you can expect your monthly payments to be much higher than if you go for something smaller and lower in value. The same applies to new versus used cars, as used cars generally cost less to finance than new ones.

Ultimately, lowering your monthly payments is all about balancing the type of finance you choose with a car that works for you and feels comfortable to your monthly budget. This might be particularly important to you if you're buying a family car, as affordability is probably at the forefront of your mind.

Consider Your Running Costs

You might have a good idea now of how to approach finding a car that fits your budget, but make sure you are thinking about the day-to-day costs too. The monthly finance payments are just one part of the deal, you will also need to keep things running too!

Here are a few important things to consider:

• Fuel efficiency: Smaller engines usually use less fuel, which is something you’ll notice the most on an average day.

• Insurance: Cars in lower insurance groups are often cheaper to cover, so make sure to check which group your chosen car is in before you buy.

• Servicing and repairs: While the cars on this list have a good reputation for reliability, there is no guarantee any car will be perfect. You should always prepare for if something goes wrong and consider how affordable the parts of your car are.

• Road tax: The amount you pay will depend on your car’s emissions, so it’s always worth checking to try and save money.

• Car body style: The shape of your car may also impact running costs, including how much fuel you use.

Taking these running costs into account can help you decide which model really fits your budget day-to-day.  

New Versus Used Cars on a Budget

When thinking about what’s the cheapest you can pay for a car, it’s worth considering if a new or used model makes more sense for your budget. Neither option is better than the other, it really just depends on what is right for you. Some people like newer cars for peace of mind, while others like the bigger savings of a used car. Similarly, some people prefer automatic cars to manual, if you’re unsure of which route to take, our automatic vs manual guide is a good starting point.

Newer cars - often come with better tech, full warranties, and lower emissions. There are some affordable options too, like the Kia Picanto, which we mentioned earlier.

Used cars - usually mean lower upfront prices and smaller financing amounts. The Ford Fiesta is a really popular choice as it’s widely available on the second-hand market and considered to be reliable.

Final Thoughts

So, which car is best for a low budget? Basically, the answer depends on you. The important thing is to always consider the full picture, like the running costs, rather than just the initial price of the car. If you’re open to used cars, they can usually offer you a lot more for your money. Likewise, smaller, new cars are always hard to beat for value. 

You should always choose something realistic for your lifestyle and financial situation. We work with lenders who consider applicants from a range of credit backgrounds, and consider car finance applications with a guarantor. If you’d like to see what car finance options are available to you, apply today, and we’ll see if we can match you with one of our trusted lenders.

 

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Editorial Disclaimer: This content is for entertainment purposes only. Opinions expressed here are the author’s alone, and not those of any bank, credit card issuer, or any other company. This article has not been reviewed, approved, or otherwise endorsed by any of these organisations. NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product/service is right for your individual circumstances.