Can You Afford Your New Car?

You have finally decided to buy a vehicle you have had your eye on for a while. Maybe it's a convertible sports car, one that looks amazing even standing still. Possibly it's a large offroad 4x4 pickup truck. Whichever car you're buying, everyone has a car they really want. The key is making sure you can really afford the vehicle.

How much should you pay monthly?

Too many consumers drastically overestimate how much they can afford to pay for a car payment. The banks will approve you up to 20% of your gross monthly income, in reality, your payment should not exceed 10% of your take-home pay. And most financial advisors strongly suggest that it should not go above 5% of your take-home pay. Remember, these numbers include all your car payments, no matter if you are paying for one or five cars.

At AutoMartNV.com, we have our car affordability calculator. You enter in the details of your purchase (down payment, interest rate etc) and it calculates a maximum price that fits in your budget.

How much will the purchase actually cost you?

The car payment is only a portion of the total monthly cost of owning a car. Financing, leasing or paying cash for a vehicle has additional expenses including:

*Insurance: If you are buying a newer car than what you have now, are financing and especially if you are leasing, you will probably have a higher insurance rate. Before you buy the vehicle, make sure you get quotes on that specific vehicle.

*Cost of Gas: Are you going from a compact car to a large SUV? What you have been paying for gas monthly might end up increasing drastically. Keep in mind the gas mileage difference between the two vehicles and if your new vehicle requires premium gas or not.

*Maintenance: For pre-owned vehicles, things like batteries, replacing/rotating the tires, oil changes, wipers, brakes and timing belts may need to be serviced sooner than you think. Even with new car purchases, the car's maintenance requirements might be much larger than you're used to on your current vehicle.

Remember that being approved for a loan is not the same thing as being able to fit that purchase into your budget. Before deciding to buy any vehicle, take the time to figure out your budget and make sure you can truly afford the vehicle you are buying.

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