We all wish that we had an unlimited supply of money with which we can buy our heart’s desires! But alas, it is unfortunately difficult to find such wealth. Of course we could still opt for that big engine and big capacity and all the frills when we’re shopping around, but it really does not make sense to spend yourself out of house and home for a spanking new coupe cabriolet or SUV! Instead, we should be looking at our means and work within our ability to purchase a car that suits our current lifestyle and affordability!
Here are some areas that we should pay attention to:
The down payment portion of your car financing scheme is the amount that you are able to pay upfront when you first start the process of paying for your car. Sometimes, you are able to use your existing vehicle to also help offset the overall costs, but generally, the down payment amounts tend to be a substantial portion of your vehicle. But while it may be quite difficult to come up with 10-20% of your car’s retail value in cash, there is an upside to putting all that available money down on the financing plan. The more you pay upfront, the less you have to pay later in the form of monthly repayments and that can definitely keep your car financing plan a lot more manageable!
Unless you are made of money and paid your entire car off when you bought it, chances are that you have to negotiate around a little big of a monthly commitment when you first purchase your car. There are some points that you need to look at when you decide how much of a commitment you can afford, the most important of which is looking at your disposable income – how much money you have after taking away all of your other regular monthly commitments like rent, groceries and insurance. While it might seem pertinent to include potential bonuses and possible promotions at work, it’s safer to work your budgeting based on your current income and take any improvements as an added bonus!
After the down payment and monthly payment amounts have been determined, don’t forget that there are still some extra costs to owning a car! This can include taxes – both road taxes and sales taxes on the car’s retail price, registration fees, insurance premiums, petrol and even maintenance of the car itself! Do make sure that you’ve budgeted yourself for these extra costs too otherwise you’ll end up with a car sitting in the garage when you can’t afford to buy gas!
There is not real right or wrong answer when it comes to how much money you should be spending on a car. What’s important is that you sign yourself up for one knowing full well how much you can afford and making sure that you don’t end up paying through your nose to keep your new vehicle! Check with a licensed and professional car financing specialist if you think you need a little more help in sorting your budgets out or come to The Smarter Finance Company – we would love to help you get the process for buying a new or used car underway!