Purchasing and owning a car is essential in the modern age to possess a decent quality of life. Before you go down to the dealership and schedule that test drive, there’s some careful preparation that needs to be undertaken. A car is more than just an item you’re purchasing. A car is an essential consumer good and buying one is more akin to making a serious investment. Before you decide which one to buy, some budgeting is recommended. Having a financial game plan will make all the difference in the world.
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Initial Purchase
If you’re buying a new or certified pre-owned vehicle, chances are you’re going to be making a down payment, and monthly payments on top of that. The newer a vehicle is, you’ll also have to have a full coverage insurance package while you’re making payments. In order to get the full picture of what you’ll be spending, we’ve created some tips for budgeting.
- A monthly car payment should be no more than 15% of your gross pay. (Or 20% of your take home pay.)
- A minimum down payment should be approximately 20% of the total cost. (Trading in your current vehicle can lower your initial down payment considerably. To find out how much your current car is, consult Kelly Blue Book. Trading in can also result in lower monthly payments, consult the dealer for details.)
- How much the price of the vehicle is will most likely determine how long you’ll be paying it off, although a larger monthly payment or trade in can shorten the length of your payment plan. While the length of a plan varies, it should exist no longer than 48 months at the most.
Other Car Expenses to Consider
As you budget for the initial cost of your monthly car payment, there’s a few other mitigating factors you should consider adding to your budget.
- Gasoline This is one of the most difficult items to set a budget for. The price of gasoline tends to go up and down and can be unpredictable. Before you purchase your vehicle, consult the EPA’s website, and make sure that the vehicle has an adequate MPG rating.
- Repairs Every car requires routine maintenance to keep running properly. If taken care of, some vehicles can last up to 200,000 miles or more. Consult publications such as Consumer Reports to determine how much you’ll be paying on average for repairs.
Island CDJR
When you’re ready to make that purchase, come to Island CDJR. Our inventory is constantly growing and we offer service and financing. A better quality of life is waiting for you, so seize it today. Find more information at myislandcdjr.com.