When it comes to getting a car, there is no one way of determining how much you are able to afford. The options might seem overwhelming, but there are a few things that can help you stay on track when shopping for a new car.
Calculate Your Budget
You can calculate what you are currently spending on transportation costs each month. Deduct other expenses, such as your mortgage, childcare, and savings. Look at how much you have been spending on car things, and determine how much more you can afford. If you do not know what this monthly payment will get you, look at car calculators to see if there is something desirable in this range. Of course, when purchasing a vehicle, you also have to consider registration fees and sales tax.
Vehicles, both new and used, have gone up astronomically in the past couple of years, so you might find what you can afford gets you something older or with more miles than you would prefer. That’s why you may want to look for ways of lowering your monthly expenses so you can put more toward a vehicle. One option is to refinance your student loans. With Earnest student loan refinancing, it can give you enough wiggle room to obtain something that fits your budget.
What to Consider When Shopping
The cost of owning a car is not the only consideration to make. Although it is usually best to avoid having the monthly payment be more than 15 percent of your monthly income. While you may feel you can afford a higher monthly payment, this is not the only expense you will incur when it comes to your vehicle. You also need to consider insurance, car tax payments, fuel, and regular maintenance. These may cost about 7 to 10 percent of your monthly payment, bringing the total cost to 20 percent. When you consider that rent or mortgage payments should be no more than 30 percent of your monthly income, you have already spent half your earnings.
Determine Other Costs
Every vehicle has its own operating costs, so if you are comparing models, do some research on what the cost of ownership would be. You may be able to contact your insurance company about what it would cost to put the car on your policy. For mileage, consider whether you do more city or highway driving, or an even mix of both. Then look at models that will fit your driving needs to keep the cost of ownership as low as possible.
Consider Your Car Ownership Habits
Think about the way you usually deal with cars. Do you just keep a vehicle for a few years, or do you drive it into the ground? If you only keep it for a few years, getting a new one might not be worthwhile, since the value can decrease quickly. On the other hand, if you are able to pay off the vehicle and keep it for a while after, you may want to invest in something with lower mileage. That way, you can avoid major repairs for some time.