Buying a car: What Can You Afford?
It makes no sense to get excited about a car by which you cannot afford. So save yourself some disappointments and calculate a payment amount you can face with no problems before starting your search.
Start with your budget. (You already have a budget, don’t you??) If you do not already have, visit my article on budgets). How much space is left in the budget? For example, are you able to include an additional $ 200 per month in your budget without adjusting the belt or deplete your savings? If so, could you include an additional $ 250 per month in your budget? How about $ 300? Continue this process until you have a general idea the amount of additional funds is available in your budget. This is the amount that is affordable in monthly payments for a car.
Details and more details:
Before you get too excited about what can you afford and start looking for the most elegant sports cars or luxury sedans, remember that monthly expenses will include not only the car payment but also insurance, gasoline, maintenance and other miscellaneous costs associated with the operation of a vehicle. As a rule the more expensive the car is, the more expensive the cost of insurance and maintenance.
Operating expenses can be as high as the third to half the monthly cost of a new car. So take the amount that fits your budget and multiply by .66. This will give you the value you should consider spending on monthly payments for the vehicle, in order to meet operating expenses
Finally, but equally important …
This is going to hurt a bit,: will need a good sum of money to make the down payment. How much? As much as possible.
A dealership is not going to simply deliver a car with a promise that you will pay for it in the future. The cash is a great symbol of your commitment to comply with all payments. That is the basic thought of a down payment.
To get a loan for a car, and often for a lease, you probably need to make a down payment of approximately 10% of the total price of the vehicle. The higher your down payment, the lower your monthly payment and you pay considerable less in total. But be sure not to diminish your savings account making too big a down payment. Find a comfortable balance.
Later, we will discuss exactly how a down payment affects your financing and monthly payments. But for now it is important to know that need a large sum of cash when shopping for a car. If you can, delay purchasing the car to give you more time to save in order to make a good down payment.
Now that you know how big the monthly payment you can afford, you can begin your quest to discover what kind of car you can buy for that price.