Choosing a Car Within Your Budget
How to Answer the Question: “What Car Can I Afford?”
So you have decided it is time to buy a new car. Great! Maybe you just want an upgrade or need to replace your current vehicle due to an accident—or perhaps you are buying a sweet sixteen gift for your child. Whatever your reasons, you now find yourself looking at makes, models and pricing options for your new car. You are probably even asking yourself, “What car can I afford?”
While safety features and all the latest technological bells and whistles are important deciding factors when choosing a new vehicle, ultimately, you can only buy what you can afford. At First State Bank, we are here to help you take a look at your budget and financial situation to help you decide how to choose a new car within your means. Plus, if you are considering taking out a loan for this big buy, we are always here if you need to speak to one of our qualified lenders.
Planning for New Car Expenses
You may be asking yourself, “What car can I afford?” The short answer is: it depends. According to Consumer Reports , how much you can spend on a new car really depends on two distinct amounts: the down payment and the monthly payment.
Determining how much you can afford to put down for a down payment depends on the amount of cash you have available and the trade-in value of your current car. Of course, you do not have to trade in your current vehicle, but most dealerships often offer that option. For the leftover total due, you will likely be paying month-to-month. To afford these payments on top of your other monthly expenses, you may decide to borrow money, take out a car loan or lease your new car.
You know your budget better than anyone. Aside from necessary expenses—like groceries, rent or mortgage and gas—you would ideally need to have a cushion every month that would allow for new or unexpected expenses. Before looking into a car you may or may not be able to afford, you need to gather the numbers and make a plan for yourself and your family’s new car budget.
Other Costs to Expect
As nice as it would be, buying a new car is not as easy as driving it off the lot and into the sunset. After accounting for the down payment and monthly payment plan, there are other costs you can expect after buying your new car. Other expenses to consider include registration fees and insurance premiums.
Insurance companies love new cars. This is especially true if the driver is a new or young driver, or if the car is expensive and thereby likely temperamental. The higher the risk of an accident with your new car, the more likely your insurance bill is to increase. You will need to plan for this increase when budgeting to buy a new car.
Fortunately, There Are Ways to Lower Costs
As you are asking yourself, “What car can I afford?” it’s good to know you can still get a great car on a budget. There are a few options available when it comes to reducing the cost of your new car, including:
- OPTING FOR AN OLDER MODEL OF A NEW CAR YOU ALREADY LOVE
- CHECKING SAFETY RATINGS—THE LOWER THE RISK OF AN ACCIDENT, THE LOWER YOUR INSURANCE PREMIUM
- RESEARCHING THEFT STATISTICS TO FURTHER BRING DOWN INSURANCE
- KNOWING HOW MUCH SALES TAX YOU’LL BE RESPONSIBLE FOR PAYING—AS WELL AS REGISTRATION COSTS AND OTHER FEES
Also, be sure to research lease and loan options that will work with how much you can afford for a down payment. That way, you will surely get a great deal on a monthly payment.
With a little planning and thoughtful research, you will own your new car in full in no time! As always, First State Bank is here to customize a car loan with a competitive rate if you decide to take the loan route.