Finance & Business

Budgeting Tips for Buying a New Car

Is it time to start looking for a new vehicle? However, today more than in the past, you should look at your new vehicle purchase as an investment, and you may need to do some budgeting work before you enter the buying process. Therefore, these are some tips to help you budget for your new vehicle.  

Determine Your Budget

Before you start searching for your new Chevrolet for sale, you need to sit down and analyze your budget. After you pay all your bills every month, how much money do you have left over? Make sure you include your savings and miscellaneous spending. How much can you logically spend on a new vehicle?

You also need to evaluate your existing savings to determine how much of a downpayment you have. You should have at least 20% of the cost of the vehicle to keep your payment low.

Calculate the Costs

As you build your new car budget, you should understand all the costs associated with owning a new vehicle. As you search for the vehicle you want, you should get insurance quotes. Also, consider your vehicle sales taxes and dealership fees.

You will need to register your vehicle every year. Initially, you will have to pay your registration costs in full, but in future years, you can save a percentage of the total cost every month. Calculate any tolls or parking expenses you encounter regularly. Remember your vehicle maintenance and fuel costs.  

As you calculate all your associated costs, divide them by 12 to determine how much you will need to save or pay out every month. Then, add in your potential loan payment. Figure out whether your budget can handle these costs, which when added to your loan payment should be no more than 20% of your income, and your loan payment itself should be less than 10%.

Consider Your Financing

How much have you saved for a new car? Can you pay in full in cash, or do you need to finance part of the purchase price? If you need financing, find out the loan terms. Then, calculate your downpayment and monthly payments. Understand that the higher your downpayment is, the lower your financing costs and better your loan terms. Keep your loan at no more than four years so you pay less interest.  

Start Saving

If you don’t have enough in your savings account to cover your desired downpayment and other costs, reevaluate your budget to see if you can cut any of your spending. You may need to wait a few months to purchase your new vehicle so you can save a downpayment.

Build Your Credit

Your credit can also impact your required downpayment and your interest rate. If your credit is not great, consider spending a few months building it back up. Pay off outstanding consumer debt, and make sure you make your payments on time. Also, reduce your debt-to-income ratio and the amount of outstanding debt versus available credit.

Budget Your Vehicle Costs

Don’t walk into your purchasing decision without all the information you need. Make sure you know what to expect up front and on a monthly basis so you can prepare for these expenditures.