How Much Car Should You Try To Afford
You ve been bitten by the new car bug. Or perhaps you re just so
tired of your current car; you can hardly stand to drive it anymore.
You re about to embark on the research phase of the car buying
experience (which is the right course of action). But, before you
even begin pointing, clicking, and eyeballing these shiny new toys;
take a step back and determine just how much car you can afford
to own and operate.
The conventional wisdom is not more than 20% of your monthly income
your net (take home) pay not your gross pay. And by the way, while
you re doing your figuring on this 20% monthly cash outlay; make
sure you include all the cars you own.
Regardless of whether you don t even pay rent or own your home
outright, stand firm on the 20% rule.
On your way to calculating your 20% budget, in addition to the
purchase price, be sure to factor in any down payment and/or your
trade-in value. The bottom line you ll finance is the bottom line.
Of course, the more money you put down the more car you can buy
and still be under the 20% rule. Keep in mind, the more money you
put down doesn t affect how much you actually pay and cars are severely
depreciating assets not investments.
Once you get close to determining your 20% number, you ll need
to know the going interest rates you ll be paying on your borrowed
money. And since we ve now broached borrowing money and interest
rates you should also plan on getting a copy of your credit report
while you re at it.
Another important aspect to consider is the costs of ownership
involved with the car. Things such as fuel, maintenance, and insurance
premiums can run up some hefty numbers on you in addition to your
Maintenance and insurance costs are somewhat related, because insurance
companies take into account the cost to repair a vehicle as part
of their premium calculation. So, if you are looking at a car that
is expensive or difficult to repair, you re probably also looking
at higher insurance premiums as well.
So, even though you should keep the 20% rule firmly in mind as
your are crunching your numbers, don t overlook all the other monthly
expenses associated with the car you are considering.
Taking the time to get all of your financial and budget numbers
in place before you seriously begin looking at your intended makes
and models will serve as a good financial rudder for you during
the car buying process and make for much wiser purchase.
Jeff Neilan's car dealer experience offers insightful car
buying tips that save you time and money. Be sure to visit http://www.acarbuyersguide.com
financing tips, ownership costs, & more.
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