Factors to Consider When Buying a Car
Buying a new car can be exciting. A new car usually has features and upgrades that are not in your old car. It is hard to determine which can is affordable. Most people are in this category which leads to late car payments. Late payments can make one remain on credit reports for many years. Read on to know how to choose a car you can afford.
It is vital you consider your finances. Your credit score and financial situation will determine the car you should buy. You need to consider your income. The car payments should not be more than 10% of what you earn. You should not look at the gross pay but instead check the net pay. It can be challenging to predict your income if you are a freelancer. However, you can still manage to ensure your finances are stable. Calculate averagely what you earned over the past year after tax to know what you can afford.
Also, put into consideration the total amount you need to own the car. You will have to pay for gas, insurance, maintenance and warranty packages. The total should not exceed 20% of your take-home pay. Make calculations of the insurance and mileage to know the total cost. You should not choose a car that consumes a lot of fuel if you cannot afford.
Take a look at your obligations financially. Calculate your take-home pay and your expenses. Financial obligations such as mortgages and student loans can take a huge amount of your pay check. This means you will spend less on a car. Knowing your financial obligation will help know what you can do without.
Your financial picture will also be determined by your credit score. It determines whether you will get approved for financing or not. It also has an impact on interest rates. Your credit score needs to be high for more financial options.
Your finances and credit score will give you an idea of which car you can afford. Remember you will need cash for down payment. A car comes with additional fees. Down payment covers fees like state taxes, title, registration fees and dealership fees. Calculate the costs to know the actual value of the car.
It is wise to shop for auto loans. There are a lot of dealers who offer financing. Dealers are usually willing to work on pricing if you get preapproved for an auto loan. You can investigate online when shopping for a car. View options of both new and used cars. You will be able to make your decision easier by knowing your financial picture. To avoid late payments, go for a car that is affordable.