Budgeting to Buy a Car
When buying a car it is important to not only consider make, model, and added features, but to also have to keep in mind how much this new purchase will cost you. Most people cannot walk into a car dealership and pay cash. They have to take out a loan and make a down payment on top of the monthly payments which can cause a hardship for some if they do not plan accordingly. Since a car payment can costs hundred a month it is important to set a new car budget in order to not negatively affect your lifestyle.
Before you even walk into a car dealership, sit down and look at your finances. You should add up how much you make per month, minus any extras like overtime. Then, you should collect all bank statements and credit card bills and see what you spend each month. You should include a set amount to put away for savings in your monthly spending. Subtract what you spend from what you make and whatever you have leftover is the most you can afford to pay in monthly car payments. Keep in mind that the car payment is not the only thing you will have to pay for. You will have to buy gas and insurance as well.
The next step is to do some price comparisons. Look in your local news papers and on-line to see what car you can afford. Cars usually run between 2000$ to 700$ a month, and that is before insurance and gas. You should look into insurance rates for the car you are most interested in before you purchase. Most insurance is based on factors like age and the type of car you buy. Some types of cars can be very expensive to insure. Also, go to the websites of the car dealers you are interested in buying from. See what kind of prices they quote and if there are any sales or events going on. It is best to get as much information you can before you go to the car dealer.
Next, check with your bank for car loans. Things to keep in mind are interest rates and how much you will pay per month based on how long the loan will be. Most banks have loan calculators that will show you how much you will be paying. With a loan calculator you can plug in how much the car costs and how much you can put down and it can show you the different possibilities of how much you will pay per month depending on the length of the loan.
Once you know what you can afford to spend and you know what car you can buy, you can now test drive the car. If you decide that is the car you want you can rest assured that your new car payment will not impede your current lifestyle.
