These few steps will guide you to the price of car you can afford.
Find out Your Monthly Budget
To find out your monthly budget all you simply need to do is calculate how much is left after paying for all your important bills and expenses. Experts in finance believe your expenses for transport which includes fuel, payment for car, and insurance should not exceed 20% of your income every month while others think finding a car that costs about half of your annual income is a cool idea and a few think between 10% & 15% of your income is ok.
The 15% payment for Car
Our recommendation is that your budget should not exceed 15% of your monthly income. If your choice is to lease, then it should be as less as 10%. However these figures do not reflect the entire amount you will spend. An extra 8% should be budgeted for gas and insurance.
Find out the needed budget for buying your car
Note down your monthly income after taxes. Then also note what is left after your rent or mortgage, as well as other expenses like feeding, savings, subscriptions etc.
If you don’t like the new cars your income can afford, consider the lease option or that of purchasing a used car. Both options help you afford a nicer car at a lesser price.
Two Important Car expenses
Keeping in mind the cost of insurance and fuelling your new car are two important expenses you have to factor into your decision making. They are also necessary, needed on a monthly basis and may cost as much as the stated 8% of the monthly income.
The Choice of a Used Car
A used car is usually sold at a much cheaper price and this should be considered. The price is very flexible and the loan could be paid back for as much as 60 months at a reduced monthly requirement. Also the car could last for as long as 5 to 6 years.
The Option of a Lease
A car is leased to you and you make payments on a monthly basis as agreed with the owner. If you like new car every 3 years, the lease option will be a good choice.
Which Choice pays me most?
The best Choice is one you are comfortable which puts the least strain on you and on your finances.
It’s important to know your budget and understand that owning a car involves more than a monthly budget.