When buying a car do you need a truck for the farm or a small car for the city how important is gas mileage to you what color do you want.
Once you decide what car you wanted figuring out where you can actually afford can seem a bit complicated.
Your monthly car payments might be affordable but you also have to keep in mind other cost you’ll have life insurance payments, registration fees, and unpredictable expenses such as a sudden hike in gas prices.
You might want to take a look at some of these costs so you’re not caught off guard.
Let’s figure out your budget on average people spend about 14 to 16 per cent of their annual income before taxes on their transportation budget.
That sad figure that includes all the expenses of owning a car not just your car payments but your gas Insurance maintenance and repairs and everything else.
Use this as a guideline and look at what this might be for an annual income of $42,000 to figure out your budget will take 16% of 42,000 that gives you $6,720 a year to spend on your car or $560 a month.
The costs involved in getting a new basic sub compact sedan that has a sticker price of about $16,450.
Any car there are plenty of extra things you can get like satellite radio or sunroof which can drive up the price but we’re going stick to a basic model.
When you buy a new car keep in mind that there are off an extra fees in addition to what you pay for the car itself you might have fees for things like documentation and destination charges for getting the vehicle from the manufacturer to the registration fees may also be included which can save you a trip to the DMV.
Some of the things you’ll encounter like registration are non-negotiable because they are required by your state or some things like documentation fees and the base price of the car may be flexible and open to some negotiating.
Depending on where you buy your car let’s say that after negotiating a price of the car and the fees and adding on your local taxes you’re paying $16,750 total.
This case you’re going to finance the car entirely that means you’re not going to make any down payment or trade in another car if you get a 6 year loan at a 3.5% interest rate looking at an online calculator your monthly payment will be around $260 but financing comes at a cost in this case you end up paying about $1,845 in interest on top of that $16,750 a principal over the course of your loan.
If you have the cash you may consider buying the car outright or if you have a few thousand to spend on a down payment you could lower your monthly payment and saving interest over time.