How Much Car Can I Afford? 3 Tips on Budgeting

 When you set out to buy a new or used vehicle, there are way more questions than answers. What kind of car should you buy? How much should you spend? What features do you want to find? The list of questions can go on and on. While we can’t tackle them all in this post, here are three tips that will help you determine the amount of money you should spend on your next vehicle. 

As you set your budget, make time to stop by Terry Auto in Lynchburg VA to view our extensive inventory. As one of the leading car dealerships in Lynchburg VA, you can count on us to have just what you need. 

How Much Cash Do You Have Available?

A good place to start when thinking about your vehicle budget is to consider how much money you have available for a down payment. While it is possible to finance a vehicle purchase with no down payment in some cases, having at least some money to put down will help with the financing process.

While down payment amounts vary from purchase to purchase, aiming for at least 10% is a good starting point. So, if you were to buy a $20,000 vehicle, you’d be looking at a down payment of $2,000 to hit the 10% mark. Think about the cash you have available and what percentage that would mean for a down payment at various vehicle price levels. Remember, a bigger down payment will lower the amount that you borrow, which will, in turn, lower your monthly payment and the amount of interest you pay over the life of the loan. 

The Monthly Payment

This is the big one for most people. Assuming you will be financing the purchase of your vehicle, you’ll want to think about how much payment you can fit into your monthly budget. Is a payment of $300 going to work for you? What about $400? You can figure out what your payment will be by using a payment calculator and entering the loan rate, term, and amount borrowed. It’s best to play it safe here and keep your monthly payment down below the limit that you think you can manage. 

What Do You Need?

One common mistake for car buyers to make is thinking that they need to spend all of the money they have available for purchase. Just because you are approved for a certain loan amount doesn’t mean you need to spend every last dollar of that limit. Instead, what you should be doing is looking at your needs for this vehicle before seeing what is available on the market today. How many seats do you need? What kind of gas mileage would you like to get? Make a detailed list of what you are looking for and then start shopping. You never know – you might get lucky and find that the perfect vehicle is available for much less than your loan maximum. 

Categories: Finance, Tips