How Much Car Can I Afford?
Posted on November 3, 2017
So many factors influence your car shopping experience. At first, it’s all excitement that you’re going to be buying a car. Then there’s the frustration of finding the right car for your needs. And when you realize you need to get a loan to buy a car, a new question enters your mind: “How much car can I afford?”
It doesn’t matter if you are well to do or make a modest living. You may have a squeaky-clean credit history or you might have a few black marks on record. You can shop for a high-end luxury sedan or a well-worn pickup truck. You still have to ask yourself how much car can I afford?
How Much Car Can I Afford?
The answer to the question is as individual as your fingerprint. No two situations are alike. Few people will get the same approval from the lender. But what’s always the same are the criteria you need to answer to find out how much car you can buy.
Determine Your Income
The first step is finding out how much money you bring home. It’s good to know this information now; you’ll need it when you get pre-approved for your car loan. Determine all your monthly income. Gather proof of income for all of your sources. Then, calculate exactly how much take-home pay you have every month.
Calculate Your Expenses
Next, you need to determine what bills you have. Gather all the payments you have in a month and write them on a list. Add them all together, then compare them with your take-home income. This is the money you have to work with for your car payments.
Give Yourself Some Wiggle Room
There are always unexpected expenses like car repairs or home maintenance costs. Allot 10 to 15 percent of your monthly income for wiggle room.
Set Yourself a Budget
Now that you know how much money you have to work with, you can set yourself a car budget. For a used car around three or four years old, you can get 60 months financing in many cases. Divide the cost of the car by the months you expect financing, then add about 10 percent for interest. This is your rough monthly payment amount.
If the budget fits the payment, you’ve just answered the question of “how much car can I afford.”
It’s a bit of a crude method, but it works. For a more precise way to determine how much car you can afford, reach out to CarUp KC. We can get you pre-approved in just a few minutes and give you exactly the amount you qualify for. Don’t keep guessing – find out how much you’re approved for today.
