How Much Car Can You Afford?
How Much Should You Pay Every Month For Your Car?
Too many car buyers overestimate how much they can afford each month. In reality, your car payment should not exceed 10% of your monthly take home pay – and ideally, it really should not be more than 5%. Take note: this ideal number includes all your car payments – regardless of whether you are paying for one car or three. At Autobytel.com, we offer a car affordability calculator. Simply enter in how much you would like to pay each month, along with a couple of other minor details (like interest rate and the amount of money you are putting down), and we can help approximate a price that matches your budget.
How Much Is Your New Car Really Costing You?
A monthly car payment is just the beginning. Buying or leasing a new or used car is also accompanied by a host of additional expenses, including:
- Insurance. If you are taking out a loan on a new or used car, you will probably incur a higher car insurance rate. Before you sign the final paperwork, call your car insurance company to determine the insurance rates for that specific vehicle.
- Gas. Are you trading in a compact car for a larger family sedan? What you are paying at the pump might end up costing you more than you suspect. Visit FuelEconomy.Gov to compare the fuel efficiency of vehicles.
- Maintenance. For used cars, simple maintenance items, like new tires, tire rotations, oil changes and wiper blades, may require your attention sooner than you suspect. Even if you are buying new, your vehicle’s scheduled maintenance requirements will be a noteworthy monthly expense.
Remember: being approved for a new or used car loan is not the same as being able to afford a new car. Before you agree to any monthly payments, take the time to ensure that this new expense won’t stretch your bank account.
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