Buying a car ain’t easy. This series of posts will explain how to simplify all the difficult steps and make for an enjoyable experience.
PART 1: THE COST SITUATION
- Step 1 | How much can you afford per month?
A general rule is to spend no more than 15% of your pre-tax monthly income on your car payment. Many people—us included—will recommend lowering that to somewhere between 5 and 10%, especially if you’re carrying other non-mortgage debts. And don’t forget those other car-related expenses that will be lumped on top of this number, including fuel, insurance, parking and maintenance.
- Step 2 | How does this monthly payment convert to vehicle cost?
Said another way, what kind of car can you get for your targeted monthly budget? You can estimate this using this handy calculator. If you’re financing your new vehicle, aim to put 10 to 20% down. Your trade-in vehicle may contribute significantly to this down payment, and you can go here to get an idea of its current value.
- Step 3 | To buy or to lease?
- Step 4 | Let the search commence!
First settle on what you need in your new vehicle (e.g., cargo room, hatchback, AWD, etc). This is important. Once you’ve done this, research what vehicles on the market check all these boxes and fit within your price budget. Stick to these parameters! This will narrow a seemingly overwhelming number of choices down to a few vehicles, and make your decision much easier and better.