You want a new car (or a used car that’s new to you), and now you need advise on how to save up for it. How much do you need and how much can you afford to pay? Many questions may pop up in your mind, but some are more important than others. Here are a few of them:
What kind of car do you want?
Before you hit the car dealers in Rochester or anywhere else, think about the kind of car you want. If you’re a car person, you probably have a make and model in mind already. But if you don’t have a lot of knowledge or experience with cars, you should base the make and model on your needs rather than the other way around. There are too many cars for each possible category to list here, but you can start by considering something that gets the job done.
Hint: If you only visit your aunt 300 miles away about once every six months, that is not the purpose of your purchase. Commuting to work in the city five days a week, however, qualifies.
How much can you afford?
Your car payments should not eat up more than 30% of your total monthly income. That will make paying for other things harder, such as rent and utilities. You may use online car payment calculators to arrive at a close estimate.
Car payments are not just about the price of the car, you should also set aside some money for possible insurance adjustments, maintenance (including replacing the tires, the battery, brake pads, fluids, filters, etc.), fuel, and other costs.
Will you be paying cash or installment?
Of course, if you’re going to pay the full amount of the car, then all you have to do is find a car you like that fits your current budget. You’ll save a significant amount of cash in the long run, as you don’t have to pay a huge interest. To afford a car in full, you’ll need to save money for a while. To buy one on installment, you may need less time to save, but you’ll be paying plus interest over a considerable length of time.
Sooner or later, you’ll have to face these three important questions about buying a car. To be on the safe side, make sure you have more money left in your bank account than the total price tag of the car if you’re paying in full, or the down payment and monthly amortization if you’re paying installment.