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How Much Car Can I Afford?

 

 

Being able to save up to buy a car is ideal, but sometimes life throws you a curveball and you need a new car now. Regardless of when you need it, buying a vehicle takes money, and knowing how much you can spend can be a challenge.

 

At Dothan Chrysler Dodge Jeep Ram Fiat, we can help you get in a car no matter what your budget is. With a large selection of new and used vehicles, you can find something you can 

afford and actually like.

 

Unfortunately, there is no exact science for calculating how much money you should spend on a vehicle. However, there are tips, tricks, and tools that can give you a good estimate.

Your Monthly Spending

Before you start looking at cars and get tempted by something brand-new and shiny, you need to think about your budget. Look at how much money you take home every month. Subtract from it the amount you spend on:

 

  • Bills

  • Rent/Mortgage

  • Money for Groceries

  • Any Other Regular Monthly Expenses

  •  

What you have left over is available for your car payment.

Check Your Credit Score

The loan you take out (and unless you have a big rainy-day fund, you will need a loan) will be influenced by your credit score. Typically, a high (good) credit score will get you a loan with lower interest.

 

You may be able to check your credit score through your credit card company. There are also tools online to help you figure it out.

 

Know what your credit score is before talking to a lender. If you walk in with the expectations of getting a loan with a low-interest rate only to find out you have terrible credit, the monthly payment you calculated isn’t going to get you the car of your dreams.

Fuel and Insurance Require Money, Too

You may have subtracted fuel and insurance out of your monthly take-home amount, or you may not have. Look at what you spend on insurance and fuel now and get an estimate on the amount of money you put towards fuel.

 

The car you buy may cause those amounts to go up. New cars, even a new-to-you used car, is probably nicer than the one you are currently driving. A newer and nicer car will probably come with higher insurance premiums. When you get an idea of which car you are interested in, talk to your insurance agent.

 

Get an estimate of what the increased price will be and make sure it fits in your budget.

You can also play around with fuel calculations. Take a look at the MPG of the car you have your eye on. To be on the safe side, knock it down a little. Then do a little math:

 

  1. Estimate how many miles you drive each month

  2. Divide by the MPG

  3. Multiply by how much fuel is per gallon in your area

 

This will give you an idea of how much you will spend each month on gas.

 

From your take-home paycheck, no more than 20% should go towards a car payment, gas, and insurance.

Online Calculators are Your Friend

There are many tools online that can help you calculate how much your monthly car payment will be based on the price of the car and interest level. You can play around with it. Try some numbers out and write them down. Take them with you to the lender for reference.

Talk to a Lender

Once you have a solid estimate of how much you can spend each month, shop around for loans. The three best places to get a loan are:

 

  1. Private Credit Union or Bank

  2. Car Dealership

  3. Car Manufacturer

 

Be sure to factor in insurance. A super-low monthly payment might seem nice, but the money you spend in interest is not worth it. Find a loan that has the lowest interest but with a monthly payment that does not exceed your budget.

Trade In Your Old Vehicle

If your current car is in decent condition, you may be able to trade it in. It will at least keep a bit of money in your pocket. Look online to get an idea of how much it is worth before going to the dealership.

 

If it is a bit of a junker and you can’t trade it in, then look into scrapping it for parts. You won’t make much, but it might get you a couple hundred bucks.

Head to the Dealership

Once you are relatively confident in knowing how much you can afford to spend each month, it is time to go to the dealership. Buying a car comes with taxes and hidden fees. Ask about them.

Be sure you know the exact total of what you will be spending before you sign.

 

Here at Dothan, we want to get you in a car you can afford. We offer specials on both new and used vehicles. Go online to check out our inventory, and then come on in to talk about financing.