How To Budget For A Car Purchase?

There is a specific question we ask ourselves when considering buying a car. The question is never about colours, brands, or design. It is always about this: 

How to budget for a car purchase?

 

For some people, this is straightforward, but for most people, it is something we don’t know, especially if this is our first car. 

Buying a vehicle (new or used) is among the most significant investments you will ever make. How do I budget for a car purchase based on my income? You need to know your monthly or annual salary income to answer this question.

Consider other long-term investments, such as insurance, maintenance, and fuel expenses. 

Buying a car doesn’t have to be impossible or untenable if you estimate the amount you can afford before deciding. Let’s keep reading to guide you through how to make buying a car a possibility. 

First thing first: And yes! Let’s talk about your income. 

Imagine your salary income is around $80,000 per year. The experts recommend spending 10% of your monthly income on car payments. 

That’s right! If your annual salary is $80,000 and your monthly salary is $6,666, you can consider spending no more than $666 on your finances.

This way, you can calculate the monthly amount you can pay.

6,666x .10= 666.60

But one more thing to consider when using this rule: your expenses. To have more stability and adjust your budget based on your costs, you can reduce this quantity to set aside specific money for your obligations. 

 

 

It is time to talk about the Down payment. 

The down payment on the vehicle. Why is this so important? Because it is not only an initial payment, it is an intelligent payment to reduce the overall cost of your car loan. Based on the research, putting down at least 20% of the car’s total cost as a down payment is recommended to help you be a quicker owner.

Let’s say you see a car that costs $38,000. You should put down at least $7,600. 

38,000x .20= 7,600.

An automobile depreciates rapidly, so making a down payment of at least 20 percent buys you time to reduce the amount of money you would pay for the car plus the interest.

Objective: Decrease your monthly payments and interest rates. 

There is a world behind car financing, and interest rates are one element. Interest rates vary depending on the following elements: credit score, down payment, and loan length. 

The recommendation is to improve your credit score to have a lower interest rate before buying a car, but you can also buy a car with a low credit score. That means that you may pay less over the life of the loan but more interest over the years. 

Let’s do the research! 

As we said, before buying, it also includes maintenance and repair costs, fuel expenses, and insurance rates; planning can help you enjoy your new car and keep your finances healthy. 

Maintenance is a big priority. Before deciding, you can research the maintenance and repair costs of your car options. 

This process takes only a moment. After considering these things, we are sure you will know exactly which plan is best for you. 

If you like this article, leave us a comment and keep in touch for new valuable information related to the automotive industry. 

Your friend, 

CarByClick Team

 

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