GUIDE: How to Budget for Your First Car Purchase in Kenya (Without Surprises)

Planning on buying your first car in Kenya? Congratulations! That rush of emotions and excitement of getting behind the wheel is real. But here’s a kicker: hidden costs and unexpected expenses love to crash the party. 

Beyond the purchase price, expenses like transfer fees (if the vehicle is used), insurance, fuel hikes, spare parts, parking fees or a sudden repair bill can easily turn your dreams into a nightmare. Many first-time buyers overlook these, leading to financial strain. That’s why smart budgeting is key.

At Peach Cars, we’re here to help you plan for your first car purchase wisely—so you drive off with confidence, not regret. This guide covers everything you need to know to budget for your first car without surprises.

Why is Budgeting BEFORE You Buy Your First Car Important?

Look. A new car is quite a temptation to everyone. Shiny rims, zero dents, perfectly threaded tyres…it’s very easy to get swept away. But before you fall heads over heels for it, remember: the price tag isn’t the full story.

Without a proper budget, you risk overspending and taking on financial stress. Beyond the purchase price, you need to plan for insurance, registration, maintenance, and fuel. A well-planned budget ensures your dream car fits your financial reality.

So, how do you avoid all these? It begins with knowing the real cost of buying a car in Kenya.

What is the Real Cost of Purchasing a Car in Kenya?

First of all, purchase prices vary depending on the car type, engine size, and whether you are importing or buying locally, etc. Here’s a breakdown:

• Foreign Used Cars – Prices start from an average of Ksh1 million to Ksh4 million or more depending on the make and model. 
• Locally-used Japanese cars – Cost as low as Ksh300,000 for older models (depending on where you are buying from) and can go up to Ksh2.5 million for more recent models in good condition.
• Mid-range locally-used cars – The cost falls within the price range of Ksh1 million to Ksh3 million. 
• Luxury vehicles—The average price of a luxury vehicle is around Ksh3.5 million for locally-used ones, and high-end models cost about Ksh14 million and more. 

However, the above estimated sales prices aren’t exactly what you will spend while buying your car. There are other associated costs that you need to take care of (which will be a bit different depending on whether you are buying locally or importing).

Buying locally comes with the following costs: 

• Purchase price (as estimates above show)
• Insurance—Third-party insurance costs about Ksh7,500 to Ksh10,000 annually for private vehicles. Comprehensive insurance, which covers damages, theft, fire, and natural disasters, costs between lows of Ksh35,000 and Ksh70,000, or higher depending on the car's value. This amount is usually charged at 3.5% to 7% of the car's value every year. 
• Ownership transfer costs – This amount varies depending on the engine capacity of your vehicle, but it ranges from Ksh1,580 to Ksh6,450. The National Transport and Safety Authority (NTSA) also charges a one-time fee of Ksh750 for an eSticker after the transfer of ownership.

Other costs you might incur include inspection fees (which you won’t have to incur if you buy with Peach Cars, which provides a free 288-point inspection report for every car listed on the platform), maintenance and repairs – yes, those tyres cost some real money.

Now, you might say, “I’d rather import.” If you choose this route, which many Kenyans do too, be prepared to part with some cash in terms of import duties and taxes. Here’s a table to summarises the costs you will incur:

Additional costs such as clearing agent fees, port handling charges, Interpol fee, Port charges, Verification fee and inspection fees apply and are not set by KRA. These can add up to about Ksh200,000 or more depending on the vehicle you are importing.

Budgeting for Your First Car

The point is, understanding what costs how much will help you budget effectively for your vehicle, and now that you know them, how do you go about budgeting?

Know Your Financial Situation

It’s only right that you begin your car ownership process by understanding where you are financially. This isn’t something that you just wing it as you go along – unless you want to park your car at home and let it gather dust because you can’t fuel or replace its tyres.

That’s why assessing your income comes first:

• What are your primary income sources and in what intervals do you get paid? 
• What about your other gigs and any additional earnings? 
• How much is your total income?

Next, your expenses:

• Deduct your monthly expenses including rent, food, black tax (that’s real), savings, school fees and transportation. 
• Compare what you earn versus what you spend. 
• How much do you save for your long-term goals? 

Once you have this data, you can decide whether buying that car is possible.

If you have saved enough to pay in cash, this is great! But remember to make sure that you have a plan to cover not just the initial buying price but the related costs as well. 

And if you have an emergency fund, don’t expect to dip into these savings if you’re running short of cash. Instead, maintain a good balance that cushions you from the unexpected financial difficulties. 

Once you have this financial snapshot, you can use it as a roadmap for your car budgeting.

Set a Realistic Budget

Once you know where you stand financially, the next thing you need to do is set up a realistic budget. Determine how much you can afford to spend on your new car. A good rule is to ensure that your car-related expenses don’t exceed 15-20% of your net monthly earnings.

Here's a simple formula:

• Monthly Income × 0.20 = Maximum Monthly Car Budget

That means, if you are earning Ksh200,000 a month, your total car-related expenses should not exceed Ksh40,000. This includes any loan payments, fuel, insurance, and maintenance. This approach prevents you from over-stretching your finances.

If you’re looking to purchase your car through the available financing options, aim to have saved at least 20% of the car’s value as downpayment. The more you pay upfront, the lower the interest amount incurred over time. 

A lower down payment might make the car seem more affordable, but it could lead to higher monthly payments. Balance is key and your downpayment should align with your overall financial plan and not put your long term goals at risk.

Speaking of downpayments, this brings us to the next topic, car financing.

Should You Consider Car Financing Options?

Depending on your financial position and the reason for purchasing the car, financing can be a sensible route. But be careful, depending on which option you choose, it might be costly eventually. 

The idea is to not stretch yourself too thin. The monthly installments and the total cost of operating the car i.e. fuel, insurance and maintenance should ideally be within the recommended 20% of your net monthly earnings. 

For starters, focus on affordability, and if you choose the right financing option, you might sail through without financial problems (preferably if you put down a good deposit).

There are several options, each with its own terms and interest rates as shown below:

• Bank Loans – They offer financing with interest rates ranging from 13% to above 20% of the loan amount per year, depending on your bank and your creditworthiness. The repayment period is between 12 to 60 months.
• SACCO Loans – This type of financing comes with interest rates from 12% per annum or more depending on your Sacco and a repayment period of up to 60 months. However, to be eligible, you must be a member of the SACCO you’re borrowing from.
• Microfinance Institutions (MFIs) – The financing amount often varies depending on the institution. Rates are higher than banks and Saccos, ranging from 2% to 4.5% per month and above but have less strict eligibility criteria. Repayment period is also shorter, from 12 to 36 months.
• Read more about car financing here.

Bear in mind that whichever financier you choose, shorter repayment periods mean higher monthly instalments but lower total interest. Longer loan terms reduce monthly payments but increase overall interest costs. The idea is to choose a term that fits your budget. 

Pro Tip: If possible, put down a significant deposit if you are using a loan to finance your car.

Beyond Car Purchasing, How Do You Budget for the Ongoing Costs?

The moment you drive off the parking lot or the showroom isn’t the end of your budgeting needs. As mentioned earlier, it’s just the beginning, and many expenses must be considered.

1. Fuel Costs

This is an ongoing expense that’ll be determined by:

• Engine size (larger engines are typically thirstier), 
• Vehicle type (SUVs typically burn more fuel than sedans), 
• Fuel type (diesel vs. petrol), 
• Your driving habits (if you are heavy footed, you’ll suffer at the pump) 
• Driving conditions (city driving is more expensive than highway driving).

In Nairobi, you might spend anywhere from Ksh10,000 to Ksh30,000 monthly on fuel, depending on your car and commute. That's a significant part of your budget!

Pro Tip: A fuel-efficient car that gets 15 km/L instead of 10 km/L could save you over Ksh100,000 annually if you drive 20,000 km per year. Worth considering, right?

2. Maintenance and repairs

Regular maintenance isn't optional—it's important if you want to keep your car on the road for a reliably long time. Plus, it helps maintain the car’s value for a long time.

While budgeting, be sure to remember that a simple car servicing might cost you upwards of Ksh6,000 while a single tyre replacement ranges from Ksh10,000 and above (this is needed every 2 to 3 years). 

For emergency repairs, you need to set aside about Ksh50,000 every year, just to be on the safe side, but the real numbers depend on your specific car and use.

Oh, and don’t you think about skipping those repairs to save money as this will lead to more expensive repairs later!

3. Depreciation

Here's something many first-time buyers overlook: your car loses value every year. If you plan to sell your car a few years down the line, it will have depreciated significantly. 

A Ksh1 million car loses 15–20% of its value in the first year and between 5-10% annually after that. If you plan to resell, this hurts. But there are certain car makes and models that hold their value longer than others.

4. Parking and Tolls

If you live or work in Nairobi or other urban centres, don't forget about the daily parking fees of between Ksh200 to Ksh400 per day in Nairobi CBD. And with new toll roads in the offing, make sure you factor in this too. That could easily amount to something above Ksh5,000 per month.

Smart Strategies to Save Money on Your First Car

Now that we've covered all the costs, let's talk about strategies to keep your budget in check while still getting a car you'll love.

1. Consider a locally-used car (but be smart about it) – Locally used cars are significantly cheaper than foreign-used ones. If your budget doesn’t allow you to buy a foreign-used car, you might want to start with this option (but check the vehicle history first – here’s where you take advantage of Peach Cars 288-point inspection (a 4-year-old Toyota might save you Ksh1,000,000 compared to a new model, while still offering years of reliable service!).
2. Negotiate like a pro. Know what a fair price is, shop at the right time, and focus on the total cost at the end, not just the monthly payments if you go the financing route. 
3. Because insurance is mandatory, make sure you get quotes from at least three insurers, consider the deductibles, and consider combining with your home, health or life insurance plans for discounts (that’s if you have one, and not SHIF/SHA!).

Real-Life Budgeting Example: Toyota Vitz in Kenya

Let's say you are looking at buying a Toyota Vitz for Ksh750,000 and you earn a net monthly income of Ksh100,000:

Scenario 1: Buying in Cash

• Car Price: Ksh750,000 paid in cash
• One-Time Costs:
  • Transfer Fees: Ksh1,500
  • Inspection: Ksh5,000 (if you are not buying from Peach Cars)
  • First Service: Ksh5,000 (could be higher)
  • Total One-Time Costs: Ksh11,500
• Insurance: Ksh40,000 (Comprehensive)
• Total Cost at Purchase: Ksh801,500 (Sale price + one-time costs + Insurance)
• Savings Time: 40 months (3.3 years) of saving Ksh20,000 per month (i.e. 20% of net income)

Monthly Running Expenses: (Aim to keep within 15–20% of Ksh100,000, i.e., Ksh15,000–20,000)

• Fuel: ~Ksh10,000
• Comprehensive Insurance: ~Ksh3,500 (Ksh40,000/12)  ~Ksh750 per month if third party
• Maintenance & Repairs: ~Ksh3,000 (provisioning every month)
• Parking & Miscellaneous: ~Ksh6,000 (Ksh300 per day x 20 days a month)
• Total: ~Ksh19,750/month (third-party insurance to ~Ksh22,500/month (comprehensive insurance) 

By buying in cash, you avoid loan interest and keep your monthly car expenses within the recommended range.

Scenario 2: Financing

If you are looking at buying a Toyota Vitz for Ksh750,000 and you earn a net monthly income of Ksh100,000 and you go the financing route, here’s an example how the numbers could look like if you get up to 70% financed at an interest of 20% p.a.)

Upfront Costs:

• Buying Price: ~Ksh750,000
• Down Payment: ~Ksh225,000 (30%)
  • Saving Time: ~11.25 months of saving Ksh20,000 per month (i.e. 20% of net income)
• Loan Amount: ~Ksh525,000 (70%)
• Loan Term: ~48 months
• One-Time Costs: ~Ksh11,500 (as in scenario 1 above)
• Total Amount Paid for the Car: ~Ksh1,000,000 excluding loan appraisal fees

Monthly Running  Expenses:

• Loan Instalments: Estimated monthly installment (assuming a 4-year term at 20% p.a.): ~Ksh16,000
• Insurance: ~Ksh3,500 (Comprehensive is mandatory for financing)
• Fuel: ~Ksh10,000
• Maintenance and repairs: ~Ksh3,000 (could be more)
• Parking: ~Ksh6,000
• Total Monthly Cost: Ksh38,500

Financing spreads the cost, allows you to own a car earlier, but increases your monthly burden. With recurring expenses exceeding the 15–20% guideline for someone earning Ksh100,000, as in the above example, you may need to reconsider either the car choice or work on increasing your budget before opting for financing.

How Do You Know the Budget Won’t Work for You?

Sometimes we want a car so badly that we ignore all the financial warnings. Don’t fall into this trap. Some red flags to watch out for:

• If the car loan payments exceed 15% of net monthly income (excluding other car expenses like fuel), you’re likely overstretched.
• If your loan repayment goes beyond 5 years, or if you do this to lower your monthly payments, that means you don’t afford the car.
• If you can’t pay a deposit for the car, you might not be financially ready for a car.
• If you’ve depleted your savings for car expenses, then you might get overwhelmed by the ongoing costs.
• If adding car expenses would put your monthly budget in the red, reconsider.

Being car poor is a real thing and it is not a good feeling. So, budget carefully.

‘Nuff Said…Ready to Find Your Budget-Friendly First Car? Peach Cars Can Help!

Phew! We’ve covered a lot that we hope will help you make the right decision while budgeting for your first car. When you are ready, Peach Cars is here to help you get an affordable car without the typical hassles involved. 

We offer a wide range of quality vehicles that suit different needs and budgets. From quality used cars to new ones, we’ve got them all. Plus, all our vehicles undergo a 288-point inspection, which negates some of the costs you’d incur and crucially ensure you make a confident decision.

Visit Peach Cars today, browse our inventory, or give us a call at 0709 726900 for a quote. Let us help you find your budget-friendly first car without any surprises. Just pure driving joy ahead! 

By Korir Issa. Issa is a Kenyan journalist and copywriter. A Masinde Muliro University of Science and Technology graduate, he holds a bachelor's degree in journalism and mass communication. You can connect with him on LinkedIn.