Before you begin your search for a new car, you might want to take some time to determine how much you can afford to finance each month. You don’t want to bite off more than you can chew by purchasing a car with a payment that is a struggle to make every month.
It’s wise to put together a budget that will help you determine a monthly car payment that makes you comfortable. Below are some ways you can get started:
Take an honest look at your finances.
Once you’ve evaluated your monthly expenses (i.e. mortgage or rent, utilities, student loans, cable, Internet, etc.), you can determine how much of your residual income can be allocated towards purchasing a vehicle.
Price out car insurance and other expenses.
When calculating your car expenses, include fuel costs, maintenance and car insurance. Knowing this information will help you narrow down your options when shopping for a car. Once you have a potential car and price in mind, you may want to call your insurance agent and ask how much it would cost to add the vehicle to your policy.
Use a calculator.
There are numerous online calculators available to help you conclude how much car you’ll be able to buy with a given monthly payment. For instance, there are online calculators that allow you to plug in a monthly payment of your choice to show you the total price of the car that particular payment will finance.
Make a decision.
Making an assessment of what you can comfortably afford before purchasing a car can help you make a better decision on the car you can afford. You may realize there are comparable used car options that work within your budget or you may decide to postpone the purchase until you can save up a larger down payment.