Being able to find the happy medium between our desire for a sweet ride and one’s responsibility to be financially responsible during these tough economic times can be a difficult task. Not only are car loans harder to qualify for, but burdening yourself with a large car payment can cripple your financial stability if you are not careful. Understanding how much you can afford and know which cars are the best value can be vital in assisting you with your car buying experience.
If you are going to finance a vehicle, be sure to decide how much you can afford before going to the car lot. Most car salesmen are not concerned with finding you the best value when you walk into the showroom floor. Most salesman work on commission and have mastered the power of persuasion. They are concerned with getting a paycheck and not making sure you are going to be able to pay your bills.
Try to limit your transportation costs to 15% of your total income. This will ensure you still have the financial stability to pay your bills, and perform maintenance on your vehicle and home. Remember the car dealership will have additional fees and taxes that will cause the price of the vehicle to go up when you sit down to sign the paperwork. Many dealerships also require you have proof of insurance to purchase a vehicle. If you are financing the car, then you will probably be required to have collision or full coverage insurance as opposed to liability only. Remember to calculate this into your budget.
Once you determine how much you can afford, go to the car lot knowing your limit. Research the type of vehicle you want and make sure there are no serious recalls on the vehicle. Also, it would help to know what cars are more reliable and hold there value better. Talking with a mechanic before you buy a car is a smart tip. They will know what problems are prevalent with the make and model and can give you an idea of repair costs. Import cars are generally more expensive to maintain, and can cause your budget to be squeezed if an unexpected problem arises.
Knowing your credit score or credit rating will give you a good idea of what kind of interest rate you will qualify for. If you have problems on your credit remember the interest rate will be higher, causing your monthly payment to rise. You can adjust the term of the loan to bring the payment down if necessary, but you will pay more for the car over the course of the loan.
Vehicles tend to go down in value, and are not to be considered an investment. If possible, buy the cheapest car that you feel is reliable. This will help you get the car paid for quickly, and open up the funds you were paying for a car payment. There are many affordable options for dependable transportation that will not kill your budget. Try to keep the cost under 15% of your income and you can avoid the added stress of a large car payment.
Brandon McKinney is an online content writer for CalculateWhat.com. CalculateWhat.com features a large variety of online calculators. In addition to using these free calculators, you can also learn more about each particular subject and calculation. For more information on car affordability, visit the car affordability calculator.