How Much Car Can I Afford?

May 7th, 2018 by

Happy new car driver holding keys

A new vehicle is a big investment, and for most drivers, choosing a truly satisfying car is of the utmost importance. For many, making the right decision means asking, “How expensive of a car can I afford?” Choosing a vehicle that’s too pricy can really derail your monthly finances, but settling for a cheap, undependable model is hardly a better option. With Cornerstone Plymouth, you can figure out how much car you can afford before you start shopping, so you don’t drive away with a serious case of buyer’s remorse.

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Figuring Affordability

The monthly cost of your vehicle shouldn’t exceed 20 percent of your monthly net pay — and that cost includes your car payment, insurance, gas, tolls, parking fees, maintenance costs, and other automotive expenses. If you live and work in Minnetonka, that could mean you have more to spend than someone who commutes from Maple Grove to Brooklyn Park every day, because you’ll spend less on gas and insurance.

So, when you’re answering the question, “how expensive of a car can I afford?” you’ll have to do some thinking about your day-to-day. If you drive 1,500 miles per month, your monthly automotive budget might look something like this example from AAA:

  • Monthly net Salary – $3,000
  • 20 percent of net – $600
  • Cost of insurance – $86
  • Cost of fuel – $260
  • Cost of Maintenance – $75
  • Car Payment – $179

Of course, your final costs could vary depending on a wide variety of factors, including your credit score and the value of your trade-in vehicle. It’s important to plan for the unexpected, so make sure to give yourself some leeway when you’re making a decision.

Reducing Your Costs

While all these charges may seem like more than you can manage, there are some simple ways to bring down your costs and make owning a newer, more reliable vehicle attainable, even if your budget is tight:

  • Negotiate a higher trade-in value for your current vehicle
  • Plan a carpool to reduce fuel costs
  • Improve your credit for a lower interest rate
  • Consider a lease to reduce maintenance costs
  • Save a larger down payment
  • Consider longer payment terms (60 or 72 months vs. 36 months)
  • Pay off debt and minimize other monthly expenses

By making a few tweaks now and doing your homework before you buy, you’ll be able to afford a more expensive car. With Cornerstone Plymouth, it’s more than possible to purchase a vehicle you love with a monthly payment you can live with, so don’t wait to explore your options.

Find Out How Expensive of a Car You Can Afford with the Financial Experts at Cornerstone Plymouth!

To learn more about the options available to you or for help in crafting a car payment that fits your monthly budget, contact Cornerstone Plymouth today! When you set up an appointment with one of our experts, we’ll help you explore all of your options, tabulate your expenses, and get more enjoyment out of every drive.

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Posted in Finance