Considering your Budget when shopping for a Car

The rule of thumb is that you shouldn’t spend more than 20% of your monthly income on your car loan payments.

If you want a better idea what you can afford paying every month try using a auto loan calculator. That way you can estimate your payments and help you choose a vehicle in your budget. Estimate the monthly payments for the vehicle you want to buy at the interest rate you are expecting to pay.

General rule of thumb when borrowing 10,000 dollar auto loan

For a 48 used car auto loan of $10,000, you should be expecting to pay about $230 to $245 monthly with a good credit record, $250 to $275 with average credit, and $300 to $315 with a bad credit score.

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close-up of a person giving car keys to a man

When it comes to buying, be it anything from a house to a car, the first thing that needs to be considered is the budget. Without a proper budget being planned out, you will not be able to even start thinking of what car you would buy, leave aside finalizing or taking a buying decision. So, get your budget right and you will soon be driving in your car.

Whether you are purchasing, leasing or financing a car, does not matter. In all the cases, you need to decide on the budget prior to finalizing the wheels on which you will soon drive.

There are certain things that helps you decide on the budget. For example, the budget is directly proportionate to how much you earn. However, that is not the only deciding factor. You should ensure that there is no or lesser debts so that you have a greater amount of your income to spend behind your new car.

Also, the budget will change according to the mode of buying you resort to.

audi_PNG1737When you are paying cash to buy your new car, you can easily do away with the finance fees and the interests that you have to pay. This definitely helps in contributing to the actual price of the car. With a cur purchase with cash, the car owner is in total control and can do whatever they wish to do with their vehicle. Also, when you buy a car with cash, you do not have to make any monthly payments which also means that your monthly budget also does not get disturbed at all.

However, you need to keep in mind that when you are purchasing a car you will need to make the down payment, sales tax on the full price of the car, government charges and the registration fees. All this will definitely affect your budget calculation.

close-up of a person giving car keys to a man

Auto leasing a car suits them most who likes to drive a car every few months. Auto leasing is easily available from credit unions, finance companies, and banks. Even, automakers too offer easy leasing options. What you just have to do, is ask. Compared to the cost of buying a car, the up-front costs of leasing a car is lower. Typically, when you lease a car you just can get your car by paying the payment for the first payment, registration fees, local taxes if applicable and a security deposit which is generally refundable. Also when you are leasing a car it will always be under warranty. One does not have to pay for the extra repairs as all major technical glitches are covered under warranty.

Additionally, when you are leasing the car you can expect the lease payments to get deducted from the taxes provided that the car is used for business for more than half of the time.