How to Calculate Your Car Loan Budget
Car Loan Budget
When you are shopping for a car, one of the most critical things to consider is your budget.
Calculate how much you can afford to spend each month on a car, as well as other costs such as registration and insurance.
The steps you should follow to determine your monthly car loan budget are as follows.
Monthly Income
Calculate your monthly income first. Included in this are your salary, bonuses, or commissions, plus any other sources of income.
After you have determined your monthly income, you need to subtract your fixed expenses from it.
A fixed expense is something you can’t change, such as rent, mortgage, car payments, student loan payments, and credit card payments.
This will give you your disposable income, which is the amount of money left over after you pay your fixed expenses.
Car Payment Costs
Then, estimate how much you will need to pay each month for your car.
The purchase price includes any interest or financing charges, as well as any associated taxes or fees.
You need to subtract this amount from your disposable income once you have this figure.
That will give you your monthly car budget.
The fees and additional expenses can vary depending on whether you get a private loan, a bank loan, or a loan from a dealership like OnTrac Auto Sales.
Be sure to not only ask about the cost of the vehicle but about other fees associated with the financing as well.
Estimated Costs of Car Ownership
There is one more step to take before you fill out a secure credit application: make a list of all the associated costs of owning a car.
These costs include insurance, gas, and maintenance. Do some research to find out what most people pay per month for insurance.
Gas prices will vary according to how much you drive, so estimate your driving routes and calculate how much you’ll pay at the current gas price.
Since maintenance costs will vary, think of how much you might spend on topping up your engine fluids and other routine car maintenance costs each month.
When making these cost forecasts, it’s better to overestimate than underestimate.
Monthly Car Budget
Once you have all these figures calculated, you will have your monthly car budget. This budget should give you a good idea of how much you can afford to spend on a car each month.
Use this budget as a guide when you are car shopping, and you should be able to stay within your budget and avoid getting in over your head financially.
Conclusion
As the price of new cars continues to rise, it’s more important than ever before to know what you can afford.
There are plenty of loan options available, but it’s important to understand your budget and what kind of car payment works for you before you start shopping.
Category: Car Purchase
