How Much Car Can I Afford?
Most people find a car and then re-arrange their budget to fit the car. That's very expensive and budget-busting way to find a car. If you're wise, you'll let your budget determine what car you can buy.
Your purchase cost
Based on your budget, you have an exact amount of money available to you right now to buy a car. That money is called Available Cash. It's made up of three things . . .
- the amount of a loan (if any) you could qualify for;
So how do you know how much of a loan you could qualify for? If you are a teen in school or a college student, the answer is very little if any. But if you are steadily employed with good credit, have a regular full time job and you know how much of a monthly payment you can afford, go to our online calculator to determine "How much car can I afford".
Financing might be done through DCU or perhaps a friend or relative willing to finance your purchase.
- the cash your trade-in (if any) will give you after you have paid off anything you still owe on the car; and
- in-pocket cash. Without credit or a trade in, your purchase price will be limited to the amount of cash you have.
Auto insurance costs
But that's not all of the costs you need to figure in.
Many states require minimum coverages for auto insurance. Younger drivers, especially male drivers, without a history of driving can pay big bucks for their policy. Some policies can start at $2000/year or more. If you could be listed on your parents' policy, the cost can come down, but it can still be considerable.
Auto insurance can be expensive. Make sure to factor in the cost of auto insurance before purchasing a vehicle.
There are many factors that go into pricing for auto insurance. You can get an auto insurance quote from DCU Insurance or call 800.328.8797 x6978.
Your maintenance costs
Not only is there a cost to purchase and to insure a car, but there's also a cost to maintain the vehicle. The last thing you want is to have your new purchase sitting idle because it has broken down . . .and you haven't planned money in your budget to maintain it.
Normal wear and tear occur on any car. If your car is an older model, there might be higher maintenance costs associated with car ownership. Costs can be $1000-$2000 or more per year if taken to a mechanic.
Like what? Like . . .
- Tires that will wear out and will need to be replaced, or your car will not pass inspection. Unless you purchase a new vehicle, you car will already have tire wear. Tire maintenance includes regular alignments and tire rotations to maximize tire longevity.
- Flats that can occur unexpectedly, especially if you bought a car with older tires, or if you regularly drive over rougher surfaces where sharper objects might be found.
- Brakes and struts that will wear out and need replacement;
- Belts such as a serpentine belt. Better to install a new one upon signs of wear than to have your car disabled spontaneously if it were to break.
- Fluid changes in addition to regular oil changes;
- Starting problems, especially in colder weather, that may incur a battery or starter replacement.
It's not a matter of "if", but "when"
Make sure to plan maintenance expenses in your budget. it is not a matter of if wear will occur, it's a matter of when normal wear will require some part(s) to be replaced.