Regardless of any dreams and ambitions which we may have, when buying a car, it is important that we stick to the budget which we can actually afford. Regardless of whether you plan to buy the car outright or you are looking into financing, it is still important not to live beyond your means. Buying and owning a car is not cheap and there are many factors to consider when you are putting together the budget for how much you can afford to spend on a new car. Here then, are just some of the key items which you should be considering whilst you are working out your budget.
Car Insurance
Car insurances is an obligatory cover which you will need for your car and it is an important consideration to make when budgeting for a new car. Car insurance prices vary from provider to provider as well as the type of car which you select. Factors to consider when thinking about car insurance are age, geographical location, driving experience, the number of claims which you have made in the past as well as the make and model of car which you decide upon. Whether you plan to pay your premium in full for the year, or do so in monthly payments, the cost should be factored into your budget.
Once you have a car in mind, be sure to check on car insurance prices and how you can best save on car insurance this year.
Actual Price of Car
The price which you see on the sticker of a new car is very rarely the actual price of the car, as there are additional costs which must be considered. For example, you could look at buying an extended warranty for the car to offer further protection, this will naturally bump up the price of the car. Additionally, you may be looking for safety features or in-car tech which can also raise the overall price.
Trade In
If you have a vehicle at the moment then it will be important that you know how much the car is worth when budgeting for a new vehicle. Selling the car outright before your next purchase is not always the most cost-effective option, and trading the car in may actually get more money discounted off your new car.
Debt
If you are looking at taking on a finance agreement for your new car, then your budget planning should focus on how much you can pay down, as well as how much you can afford monthly. The large majority of financial experts agree that you should not have debt which goes above 36 percent of your gross income. When budgeting for a finance deal, be sure that you won’t go above this 36% threshold.
Final Thoughts
Remember that a budget is not the amount of money which you have available, but rather the amount of that money which you can afford to spend. We all have dream vehicles and it can be easy to be tempted into spending more than you have on a great looking car, to avoid financial problems however, you should let the budget drive your choice, rather than the car which you would like to own.
