In this consumer-driven culture, people are always trying to find a way to buy the next big thing- especially when it comes to vehicles. And when car companies are constantly coming out with the latest and greatest model, the pressure to buy can be overwhelming.
So how do you know when to resist and when to give in? Should you be spending a large amount of your income on your car, or should it only take up a small sliver of your available cash?
Here are a few useful tips to help you balance your automobile budget and make the most out of your next car purchase.
A car may be listed for a certain price, but each individual vehicle has its own additional expenses that come with it. Gas, repairs, registration, fees- all of these costs and more give vehicles a bigger price tag than what is typically advertised.
In order to find the true cost of a new car, be sure to take maintenance into consideration. If a certain model is more durable or and fuel-efficient, it will be a much more worthwhile and cost-effective purchase in the long run.
If you’re trying to keep your wallet happy while you’re shopping for a new car, there are practical budgeting tools that you can use to keep expenses to a minimum. One of these tools is the 20/40/10 rule, which creates simple spending guidelines.
According to this rule, it’s best to purchase a car that you’re able to make a 20% down payment on, finance the vehicle in 4 years or less, and spend no more than 10% of your income on your monthly car expenses.
Be sure to take into consideration not only the dollar amount you will need to pay, but also the amount of time that it will take you to pay for your next car. Long-term car loans will accrue more interest, which will only make it more difficult to continue making payments in the future. If you’d like to calculate the cost of a new car in more detail, use this cost calculator to help you determine an appropriate budget.