For many people the purchase of a vehicle will become a top priority in their financial goals at some point. Our counseling team is often asked about what amount is appropriate to spend on a vehicle. Here are a few questions they ask the client to consider first:
Do you know how much room is in your monthly budget? Knowing what kind of cash you have available in your monthly budget for transportation is pretty important when shopping for a car. Finding this amount sometimes takes a little budgeting work, but it’s worth it before you get on a car lot or start vehicle shopping online. Take a look at our 5-minute budgeting lesson if you need help getting started.
What kind of interest rate do you think you’ll get? Why? Knowing your credit history and score are pretty important before you start car shopping especially if you’re going to a dealership and seeking an auto loan. Also, the interest rate you get will determine how much you spend over time on the vehicle. A better credit score can mean big savings on your overall cost. You can get a free credit report at AnnualCreditReport.com.
If you purchase the most car you can afford, how will this decision affect other essential budget requirements? Our caring financial professionals are trained to look at the client’s entire financial picture. They want the client’s financial goals to compliment each other. If a new car purchase hinders other goals, our team asks the client to rethink their question and assumption. Another helpful question to ask is “How little can I pay for a car and still have reliable, safe transportation?” Not everyone answers this question with the same amount, but it’s important to ask this question to explore cost effective options. Sometimes a really great deal can be found if the focus is on the vehicle needs rather than the maximum amount a budget can handle for a car.
Now it’s time to do some math. We’ve made this step easy for you with the calculator below. Plug in the numbers and adjust the terms and interest rates to see what you can expect.
Also, we’ve developed a simple, 6-minute course on car loans to help you plan your next steps in the car buying process.
If you need help with your car buying goals feel free to contact the caring financial professionals for a free advisory appointment today.