If you’re looking to buy a car, it’s a good idea to do some homework before hitting the dealerships. Not only should you research pricing and safety, but also you should definitely know what you can afford before you get started.
Some financial experts recommend spending less than 20 percent of your take-home pay. Keep in mind this is just a guideline. You could spend a little more or less, depending on your situation and priorities, as long as you are smart about your personal finances overall.
When looking at your car budget, consider all expenses, not just your monthly car payment. You will need to consider various up-front costs, such as registration fees, as well as monthly insurance, gas, maintenance and repairs.
It boils down to this: you have a specific number to work with each month. That number should cover your monthly savings, housing, transportation, utilities, food and other necessities. How you allocate to your car budget is up to you, but make sure you can still comfortably handle all of these expenses without stretching your budget too tight.
It’s easy to get excited when you find something you love, but spend wisely so you don’t end up with more car than you can afford. Remember, just because the numbers say you can afford a certain amount, doesn’t mean you should automatically spend that much. If you have debt you are trying to pay or like a lot of flexibility in your budget, you may want to scale back from that number. Ultimately, only you can determine what you can truly and comfortably afford.