To figure out if you really can afford a new car, here are four evaluation tools you should always use before heading to the dealer's lot.
First of all, consider how much money you actually bring home from your job. As a general rule, it is recommended that you only pay no more than 10% of your take-home pay towards a car payment.
Along with paying for gas, maintenance, registration, and other regular expenses, there will also be the matter of paying for car insurance.
If you are like many people who want to drive a new car every year or so, you may decide to lease a vehicle instead of buying it outright. If you are on a tight budget but really want to have a new car, leasing may be a smart way to go.
Finally, if you can only afford a loan for your car that has you paying on it for the next decade, chances are that you can't afford the car. Since most experts recommend loan durations be no more than 36 months for a used car and 60 months for a new car, keep this in mind as you look around.
By using these evaluation tools, you can make a smart financial decision regarding your car purchase.
Your Take-Home Pay
First of all, consider how much money you actually bring home from your job. As a general rule, it is recommended that you only pay no more than 10% of your take-home pay towards a car payment.
If after figuring up your other bills and how much money you'll have leftover you find you'd be spending well over 10% of your monthly take-home pay on a new car, you may need to look at other options.
Car Insurance Rates
Along with paying for gas, maintenance, registration, and other regular expenses, there will also be the matter of paying for car insurance.
Since this can vary depending on the type of vehicle you want, your driving history, and other factors, don't buy anything until you have contacted experienced insurance agents to get a quote on your insurance rates and discuss what options you may have to make your insurance as affordable as possible.
For example, you can reach out to The Lofrumento Agency, Inc. for car insurance recommendations.
Own or Lease
If you are like many people who want to drive a new car every year or so, you may decide to lease a vehicle instead of buying it outright. If you are on a tight budget but really want to have a new car, leasing may be a smart way to go.
In many instances, you will need less money down to buy the car, have smaller payments for a shorter period of time, and then get to hand it back to the dealer a year or two later.
However, if you choose this path, remember to keep the car in great shape and watch your mileage, since additional costs can come if you mess up the car or drive it more than anticipated.
Your Loan Terms
Finally, if you can only afford a loan for your car that has you paying on it for the next decade, chances are that you can't afford the car. Since most experts recommend loan durations be no more than 36 months for a used car and 60 months for a new car, keep this in mind as you look around.
By using these evaluation tools, you can make a smart financial decision regarding your car purchase.
