1/23/2024 0 Comments New car payment![]() ![]() ![]() Just because your take-home pay allows you to finance a car doesn’t mean you’ll be approved for the amount you want to borrow. Other expenses to budget for include routine maintenance to keep your car running smoothly, as well as optional extras such as car washes. Buying a fuel-efficient car can help keep your fuel expenses lower, but if gas prices hike suddenly you’ll have to shell out more money for the same amount of fuel. Fuel prices fluctuate, whether you’re buying a gasoline or diesel car or going electric.If you want to be fully protected, adding collision and comprehensive coverage can help protect you financially if you’re involved in an accident or if your car is damaged by theft, vandalism, an animal encounter, or a hailstorm. Each state differs in its rules, but you’ll need liability insurance at a minimum. Car insurance is required in all states in order for you to legally drive your car.In order to actually drive the car, you’ll need to insure it and fill it with fuel. Your monthly car payment isn’t the only automotive expense you’ll need to budget for. The following table shows a breakdown of ideal car payment ranges for a variety of monthly earnings. In general, your car payment shouldn’t exceed 10% to 15% of your monthly take-home pay. If your income varies from month to month, calculate the average amount over the last six months to a year and use that amount as your monthly take-home pay. You might know how much your annual salary is, but how does that translate to take-home pay? The easiest way to find out is to look at your most recent pay stubs, which will show you how much in taxes and other expenses (such as health insurance premiums or retirement contributions) are deducted from your monthly earnings. The following steps can help you determine how much car you can afford. That might mean setting your sights on the most affordable sedan on the market, or considering a luxury SUV or crossover. Doing this will give you a better idea of the types of vehicles to look for. How to determine how much car you can affordīefore you start searching for your new car, you need to set a budget. Read on to learn how you can determine how much car you can afford based on your financial situation. So yes the entry-level might be $30,000, but if you like the one with the 14-inch touchscreen, you like the sunroof, all-wheel drive, every safety feature available, you are easily looking at $45,000-50,000 for that exact same vehicle."ĭrury says many buyers are maximizing the term of their loans too, which is a risky move if you are already struggling with your monthly payment.In general, it’s recommended to spend no more than 10% to 15% of your monthly take-home income on your car payment, and no more than 20% on your total vehicle expenses, including insurance and registration. They’re very costly products and on top of that, when you fully load a car, when you go from base to mid to high trim level, you can add on 30-50% of the vehicle’s cost. "It’s kind of mixed results in the sense that cars are getting more expensive but consumers' preferences for certain kinds of cars, SUVs and trucks, they’re expensive. "It is what did the consumer pay for the vehicle, how much do they finance of it, how much did they put down, the term length that was involved? So, really when we roll those numbers together, we get these trends over time, and this last year, year and a half we’ve seen some staggering increases," he said. The average down payment for a new vehicle also was at a record high during the first quarter of 2023 – $6,956.Įdmunds Director of Insights Ivan Drury breaks down the data collection. ![]()
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