New Car Buying: Budgeting

When people buy a new car, they often jump into the water head first without looking out for the rocks at the bottom. To extend the metaphor, before you go and buy a new car, you have to know how shallow your water is. If you don’t, you could end up hitting your head and knocking yourself out–financially, that is. And with buying a new car being such a huge purchase, getting knocked out could mean a lot of trouble in your financial future. That’s your credit report and your ability to purchase other cars going right down the drain.

I know what you’re thinking. What on earth is she talking about??! I guess I could be a little clearer. What I’m saying is that if you’re going to be buying a new car, then you have to budget first. This is the most important step before you do anything else. To buy a new car, you have to know what kind of car you can afford, if any at all.

You have to look at more than just the price of your car, too. You may be getting a five thousand dollar car, but since you have bad credit, your monthly payments may be around six hundred dollars. That’s a lot harder an impact on your funds than getting a twenty thousand dollar car that costs you three hundred a month. And besides that, there’s insurance. When getting a car financed, you’ll have to get more insurance on it, and insurance companies charge higher rates for new cars to begin with, so you have to factor that in. Then there are repairs, and if your new car doesn’t have such great fuel economy, you’ll be needing to think about gas, too…

So sit down. Get out some paper and a calculator. Or use your computer like you’re in the twentieth century–I don’t, but I like to have things on paper. Microsoft Excel can be really useful in budgeting. Draw up all of the living expenses you have–your rent, electric, all of your bills, as well as how much you spend a month on things like food, clothes, even entertainment. Factor in how much you make a month, how much money you have right now, what you have in savings and all that. Figure out if you can even afford a new car.

The basic rule to go by is that no more than fifteen or twenty percent of your budget for every month should be devoted to your car.

Cheers,

Fashun Guadarrama.

About the Author:

Austin Davis, consumer car repair advocate. "Hi there! I love to help people solve their car repair problems and I hope my site was helpful to you today. Thank you for stopping by."
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