How Do I Know How Much Car I Can Afford?

During these rough economic times people need to watch their money a little closer. However, basic needs still arise causing you to fork over more money. With that idea in mind, we would like to go over some basic things to consider when you are making an automobile purchase. There are so many options available when it comes to buying a car now that it is very important you do your homework first. You want to be sure that not only your payment is within your budget, but many other things such as insurance and repairs are as well.

Do Your Homework

When deciding to buy a car it is very important to sit down first and see what you have to set aside for a monthly expense. It is very important to be honest with yourself as you will not want to stretch yourself thin. Life happens and if it is a life lesson involving money you want to be prepared. These are a few things you want to shop around for:

Your new car.

how-car-afford

Pick one vehicle and 2-3 backups in case your first choice does not work out. Look for prices and figure out roughly how long you will be paying on it for. Many calculators are available online to help with rates.

Insurance.

Check around for prices on all of your vehicles and make sure to get the price for full coverage if you are going to be making payments.

General Repair.

You need to know what the maintenance schedule is for your list of vehicles so you can have an idea of what it will cost you month to month to have it serviced. Also look at general parts such as alternators, starters, and spark plugs. These are most common to break first and there is a big difference in price for a little car to a full size SUV.

Fuel Costs.

It is not only the MPG you need to be worried about. Look to see how big the gas tank is and if the motor can run on fewer cylinders at normal speed. This can cut down on fuel costs.

The Two Biggest Car Expenses

The two biggest car expenses and most important things to look at when buying a car is the payment and your insurance. This will take up about 80-90% of your budget that was set aside. Insurance will probably be the most important of the two since it varies on so many things such as your age, make/model of the vehicle, sometimes color of the vehicle, and even your credit. All insurance companies are different as to what they use for criteria so be sure shop around.

To demonstrate the difference in insurance, I looked up a few examples on Progressive. The figures I have here should shed some light on what type of vehicle you may want to look for. Please remember that these numbers will vary for everyone, but should stay relatively the same as far as difference in price between each other. These are also just the figures for the collision portion and you will still have to figure in liability, comprehensive, etc…

Car Model Collision

Deductible

6 Month

Premium

Chevrolet Corvette ZR1 $500 $2169
Chevrolet Cobalt $500 $381
Ford Mustang GT 500 $500 $2169
Ford Focus $500 $398

These figures are a 6 month price, but you can see the significant difference. (This is not the total either, just a piece of what makes the month to month total) Another way to look at it is that the more expensive it is to fix, the more you will pay. That is one big piece of criteria the insurance companies look at. How likely you will wreck it and what it will take to fix it. This is also why it is important to shop around. Not every company uses your credit or cares about color of the car. And each company also has their own statistics they run to come up with their prices. Bottom line, do your research and once you know what you want to buy, shop for insurance first before stepping on the dealership. Once you have your insurance quote, be sure when you buy your car to leave a percentage of your budget aside each month for repairs and regular maintenance.

Repairs, Maintenance, and Fuel Car Costs

Fuel will be something to keep in mind when you buy your vehicle. It should not make as much of a difference as your monthly payment or insurance though. The difference between a couple MPG’s will be noticed only over the long run and most people do not keep track of it. So you just need to decide if you want a big car or little one and go from them. Also, many cars are going “green” nowadays, making it easier to save money and the environment.

Repairs and maintenance will make up the last portion of your budget that you set aside each month. Most month to month maintenance will require washing and topping off fluids. But every so many miles, you will have to take it in for its checkup and some vehicles have longer maintenance lists than others. You will want to talk to the dealership or your family mechanic and check on prices for maintenances needed. It is important to have these routinely done as it preserves the life of your car and keeps the warranty intact. Keeping repairs in mind will matter because the bigger the vehicle, the more money general parts such as alternators, starters, tires, wheels, and brakes cost. Some items will be covered under warranty for a short period of time, but outside of that you are on your own. The difference between a little car and a bigger car can mean a couple hundred dollars in difference in the price of the part. Not to mention that if you decide to have a shop do it, you will have to tack that price on as well.

So when you shop for a car the most important thing you can do is your homework on your selected vehicles. If you research our suggestions above you will have a clear cut idea of what you will spend approximately each month. And when compared to your monthly budget you set aside for your new car, you can then compare the two and know how much car you can afford. Good luck in your search!