The Starting Line: Know Your Budget and Stick to it
Know Your Budget and Stick to it
Buying a car is one of those decisions in your life that should never be taken in a haste. It is a long term investment that you have to stick around with for a long time. Most importantly, when that brand new car stands in the driveway, from that day onward, your car will also start falling in value. It is a sad truth, but, that is the truth. Hence, when you are buying your very first car, be it an old one, or a new one, make sure that you have thought about your decision a thousand times if needed.
There are many steps to buying your first car and just like anything, you need to have a budget fixed. That is the very first step- fixing the budget and most importantly, sticking to it too. Fixing the budget means you have to include a lot of things as the cost price of the car is not just something that you have to pay only. A car brings other expenses too and the total amount would add up to something that you might not have even thought of. So, do not be up for any nasty surprises as that will ruin the car buying experience totally. With your budget clearly in front of you, you will be able to buy your dream car without getting lost in any maze.
How To Fix Your Budget
There are a few steps in finalizing the budget for your car.
- Monthly Income And Expenditure
The very first place to start is getting a clear picture of your monthly income and expenditure. Knowing your financial stand point is very important. You will then know which cars are in your budget. So, pull out the calculator and start doing the math. Consider the taxes that do not count. It should be the take home amount that should be considered and not the gross amount.
Once you know what the gross pay is, your next concern is to decide how much you are actually willing to spend for the new car. You might have a big budget, but that should not push you into buying an expensive car if you actually do not need it. You should consider the utilitarian value of the car when you are buying one.
- Take Into Account The Car Loan
It is not possible for everyone to buy a car with cash. In all probability, an auto loan is the one solution that everyone considers. Now, if you are considering an auto loan, that gives rise to monthly payments which needs to be considered in your monthly budget too. Generally, not more than 20% of the monthly income should be reserved to be paid as monthly installments.
- Consider Other Loans and Expenditure
Student loan, house loan, mortgage rent, personal loan- all should be considered as it cuts out a chunk from your monthly budget as well. All existing expenditure is going to get reflected on the monthly budget.
- The Full Cost of Your New Car
This does not only mean the cost price of the car. The full cost of your vehicle will include many other things and the end result will be the amount that you have to pay for your car. Once you understand the full costs, that will also help in finalizing the budget and bring about changes in your preference. For example, there will be initial costs like the down payment, tax, licensing/registration/title fees, and dealership documentation fee. Apart from the initial costs, there will be other recurring costs too that include the easy monthly installments, car insurance, gas, maintenance costs and State Registration renewal.
- Eat As Much You Can
There is no point in biting a piece of cake that will stuck down your throat. Buying a car is similar to that. Not only is it important to plan out a budget, but the advice is to stick to it. If you do not stick to the budget then that will invite a lot of consequences in the future like failing to make the down payments, repossession of the car and ruining your credit score.