What is the Best Payment for Your Budget?
When buying a car, it can be tempting to get the most expensive one and worry about payments later. This is unfortunate and can lead to a consumer having plenty of regret when he or she can hardly afford to make the payments. Ideally, before heading to a dealership or showroom, one should jot down a few numbers and understand what they can afford. With this in mind, here is a quick guide on how to determine the best payment for your budget.
Income: For starters, one should look at their income from work and any other gigs. To do so, a potential buyer should look at his or her after tax income. When doing this, one should not count on raises in the future. By looking at current income, a buyer will not get carried away and end up with an expensive and difficult to afford payment on his or her hands.
Expenses: After looking at income, one should look at their monthly expenses. This should include everything from rent to monthly grocery bills. When pondering this, one should not opt to lie to themselves as it is easy to think about lowering expenses. In reality, most people will stick to their same budget and will not make many amends. Remember, while it is tempting to stop eating out or buying lotto tickets, most people will not do so, and it is wise to include these in the calculations.
Car expense: At the same time, one should look at their expected monthly vehicle costs. Not only will a consumer have to pay taxes, but he or she will have to pay for fuel, insurance, parking and maintenance. Often, especially for a younger driver or one with a bad record, this will add up quickly. In fact, when adding up the extra expenses, some drivers will realize quickly that they will spend just as much on insurance, gas and other items as they will for the car payment.
Emergency fund: It is one thing to get a new car; it is another thing to afford this large expense. To understand this further, one should think about what would happen if they lost their job for a few months. In many cases, a consumer would have to give up their vehicle and return it to the lender. To avoid this embarrassing and annoying problem, a consumer should have, at minimum, a six month emergency fund. In the fund, one should have enough money to make the car payments and pay all the other bills. Without a doubt, this is a serious step one should consider as it is easy to get excited and not think about this potentially catastrophic, but very possible, issue.
It is easy to run out and buy a new car. Sadly, many salespeople take advantage of excited and foolish customers. To avoid this and save plenty of money, a potential customer should ask a few questions and look at his or her budget a little more closely.